On the Stability of Performance Measures Over Time

University of Padua Department of Statistical Sciences Working Paper No. 17

19 Pages Posted: 9 Jan 2011

See all articles by Giovanna Menardi

Giovanna Menardi

University of Padua - Department of Statistical Sciences

Francesco Lisi

University of Padua - Department of Statistical Sciences

Date Written: December 30, 2010

Abstract

Performance persistence is a relevant issue when evaluating the predictability of future results of managed portfolios. A related crucial aspect is the stability over time of the measure used to assess the performance, defined as the degree of association between the rankings of financial assets induced by the performance measure throughout subsequent periods.

In this work a general class of possible criteria to measure stability is proposed. Then, the attention is focused on a specific index, whose asymptotic expected value and variance are derived under the null hypothesis of absence of stability. Furthermore, two statistical tests for evaluating the significance of stability are discussed.

An application to a large set of US equity mutual funds shows that stability may remarkably vary, as the performance measure or the time widow width where it is computed change.

Keywords: Performance Measures, Rankings, Stability Over Time

JEL Classification: C1, G1

Suggested Citation

Menardi, Giovanna and Lisi, Francesco, On the Stability of Performance Measures Over Time (December 30, 2010). University of Padua Department of Statistical Sciences Working Paper No. 17, Available at SSRN: https://ssrn.com/abstract=1736884 or http://dx.doi.org/10.2139/ssrn.1736884

Giovanna Menardi

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Francesco Lisi (Contact Author)

University of Padua - Department of Statistical Sciences ( email )

V. Cesare Battisti, 241
Padova, 35122
Italy
+39 049 8274182 (Phone)
+39 049 8274170 (Fax)

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