Portfolio performance manipulation and manipulation-proof performance measures

• 成果类型: Article
• 署名作者: Ingersoll, Jonathan; Spiegel, Matthew; Goetzmann, William; Welch, Ivo
• 署名单位: Yale University; Brown University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhm025
• 发表日期: 2007
• 页码: 1503
• 关键词: investment performance; RISK; management

摘要

Numerous measures have been proposed to gauge the performance of active management. Unfortunately, these measures can be gamed. Our article shows that gaming can have a substantial impact on popular measures even in the presence of high transactions costs. Our article shows there are conditions under which a manipulation-proof measure exists and fully characterizes it. This measure looks like the average of a power utility function, calculated over the return history. The case for using our alternative ranking metric is particularly compelling for hedge funds whose use of derivatives is unconstrained and whose managers' compensation itself induces a nonlinear payoff.