Does the Choice of Performance Measure Influence the Evaluation of Hedge Funds
Journal
Journal of Banking & Finance
ISSN
0378-4266
ISSN-Digital
1872-6372
Type
journal article
Date Issued
2007-09-01
Author(s)
Abstract
The Sharpe ratio is adequate for evaluating investment funds when the returns of those funds are normally distributed and the investor intends to place all his risky assets into just one investment fund. Hedge fund returns differ significantly from a normal distribution. For this reason, other performance measures for hedge fund returns have been proposed in both the academic and practice-oriented literature. In conducting an empirical study based on return data of 2,763 hedge funds, we compare the Sharpe ratio with 12 other performance measures. Despite significant deviations of hedge fund returns from a normal distribution, our comparison of the Sharpe ratio to the other performance measures results in virtually identical rank ordering across hedge funds.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
31
Number
9
Start page
2632
End page
2647
Pages
16
Subject(s)
Division(s)
Eprints ID
30213