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Incremental Sharpe and other performance ratios

Benhamou, Éric; Guez, Beatrice (2018), Incremental Sharpe and other performance ratios, Journal of Statistical and Econometric Methods, 7, 4, p. 19-37

Type
Article accepté pour publication ou publié
External document link
https://hal.archives-ouvertes.fr/hal-02012443
Date
2018
Journal name
Journal of Statistical and Econometric Methods
Volume
7
Number
4
Publisher
Scienpress
Pages
19-37
Metadata
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Author(s)
Benhamou, Éric
Guez, Beatrice
Abstract (EN)
We present a new methodology of computing incremental contributionfor performance ratios for portfolio like Sharpe, Treynor, Calmar orSterling ratios. Using Euler’s homogeneous function theorem, we areable to decompose these performance ratios as a linear combination ofindividual modified performance ratios. This allows understanding thedrivers of these performance ratios as well as deriving a condition fora new asset to provide incremental performance for the portfolio. Weprovide various numerical examples of this performance ratio decomposition.
Subjects / Keywords
C12; G11; Sharpe; Treynor; recovery; incremental Sharpe ratio; portfoliodiversification
JEL
C12 - Hypothesis Testing: General
G11 - Portfolio Choice; Investment Decisions