Stock funds: risk-adjusted performance measures and implicit risk preferences

• Autor(a) principal: Pinheiro, Carlos
• Data de Publicação: 2009
• Outros Autores: Shigeru, Alberto Matsumoto, Tabak, Benjamin
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional da UCB
• Texto Completo: http://twingo.ucb.br:8080/jspui/handle/10869/700; https://repositorio.ucb.br:9443/jspui/handle/123456789/7933
• topic: performance measurements; Sharpe Index; Sortino Index; Fouse Index; upside potential

The objective of this work is to verify the implicit risk preferences in the use of riskadjusted performance measurements. To do so, the following risk measures will be used: the Sharpe Index, the Sharpe’s alpha, the expected return, the Sortino Index, the Fouse Index and the upside potential ratio. We estimate the correlation of the ranking obtained with these measures in relation to the ranking obtained through the use of both the utility function and the prospecting function of the value theory. Information on the Ibovespa equity funds for the period from March 1999 to February 2005 based on 57 funds were collected. It can be concluded that the Sharpe’s alpha dominates all other measures in terms of the correlation with the quadratic utility function and with the prospecting function of the value theory. For low risk aversion levels, the traditional measures Sharpe Index and expected return did not present high correlations with the quadratic utility function and with the prospecting function of the value theory. For high risk aversion levels, the Sharpe’s alpha, the Fouse Index and the upside potential ratio presented good results with the quadratic function as well as with the prospect function of the value theory.