Citation

Discussion Paper Details

Please find the details for DP1885 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Performance Measures for Dynamic Portfolio Management

Author(s): Lars Tyge Nielsen and Maria Vassalou

Publication Date: May 1998

Keyword(s): fund management, Jensen's alpha, performance evaluation and Sharpe ratio

Programme Area(s): Financial Economics

Abstract: This paper proposes instantaneous versions of the Sharpe ratio and Jensen?s alpha as performance measures for managed portfolios. Both are derived from optimal portfolio selection theory in a dynamic model. The instantaneous Sharpe ratio equals the discrete Sharpe ratio plus half of the volatility of the fund. Hence, it does not penalize fund managers for taking risks as much as the discrete ratio does. This is justified by dynamic portfolio theory. Unlike their discrete versions, the instantaneous performance measures take leverage correctly into account in a dynamic setting, and they take into account investors rebalancing their portfolios over time.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1885

Bibliographic Reference

Nielsen, L and Vassalou, M. 1998. 'Performance Measures for Dynamic Portfolio Management'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1885