TY - JOUR
T1 - Unveiling the embedded coherence in divergent performance rankings
AU - Bosch-Badia, Maria Teresa
AU - Montllor-Serrats, Joan
AU - Tarrazon-Rodon, Maria-Antonia
PY - 2014/5
Y1 - 2014/5
N2 - This paper focuses on analyzing functional relationships among performance measures, centered on the adjusted differential risk premium between the asset and the benchmark and on Sharpe-1994 ratio. First, we develop a risk normalization procedure for variance and Aumann-Serrano riskiness which turns contradictory rankings into coherent ones, and combines the effects of correlation and outliers into the analysis. On this basis, we deduce functional connections among performance measures, arriving at a new indicator which expresses performance as the addition of three effects due to Sharpe ratio, correlation and outliers. We show it is a strictly increasing function of Homm-Pigorsch ratio.
AB - This paper focuses on analyzing functional relationships among performance measures, centered on the adjusted differential risk premium between the asset and the benchmark and on Sharpe-1994 ratio. First, we develop a risk normalization procedure for variance and Aumann-Serrano riskiness which turns contradictory rankings into coherent ones, and combines the effects of correlation and outliers into the analysis. On this basis, we deduce functional connections among performance measures, arriving at a new indicator which expresses performance as the addition of three effects due to Sharpe ratio, correlation and outliers. We show it is a strictly increasing function of Homm-Pigorsch ratio.
KW - Coherent rankings
KW - Homm-Pigorsch ratio
KW - MSquared
KW - Performance measures
UR - http://www.scopus.com/inward/record.url?scp=84894265545&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2014.01.015
DO - 10.1016/j.jbankfin.2014.01.015
M3 - Article
SN - 0378-4266
VL - 42
SP - 154
EP - 165
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 1
ER -