Refinements to the Sharpe Ratio – Evidence from Malaysian Equity Funds

다국어 초록 (Multilingual Abstract)

We apply M-squared measure to evaluate the performance of Malaysian equity funds. Specifically, we show how financial leverage can be applied to increase the returns or to reduce the risk exposures of funds. Several alternative refinements to the original Sharpe ratio are also employed to evaluate the funds during periods of negative excess returns. We find that modified versions of Sharpe measure generally lead to similar performance rankings as the original Sharpe ratio. Our findings imply that while Sharpe ratio has experienced several methodological improvements, its basic underlying concept remains remarkably intact.

참고문헌 (Reference)

1 Scholz, H., "The Sharpe ratio’s market climate bias - Theoretical and empirical evidence from US equity mutual funds" Ingolstadt School of Management, Catholic University of Eichstaett-Ingolstadt 2006

2 Sharpe, W. F., "The Sharpe ratio" 21 : 49-58, 1994

3 Jensen, M., "The Performance of mutual funds in the period 1945-1964" 23 : 389-416, 1968

4 Ferruz, L., "Style portfolio performance: Empirical evidence from the Spanish equity funds" 5 : 397-409, 2005

5 Israelsen, C., "Sharpening the Sharpe ratio" 33 : 49-51, 2003

6 Arugaslan, O., "Risk-adjusted performance of international mutual funds" 34 : 5-22, 2008

7 Modigliani, F., "Risk-adjusted performance" 23 : 45-54, 1997

8 Scholz, H., "Refinements to the Sharpe ratio: Comparing alternatives for bear markets" 7 : 347-357, 2007

9 Markowitz, H, "Portfolio selection" 7 : 77-91, 1952

10 Ferruz, L., "Performance measures: Advantages of linear risk penalization" 19 : 73-85, 2009

11 Sharpe, W. F., "Mutual fund performance" 39 : 119-138, 1966

12 Tobin, J., "Liquidity preferences as behaviour towards risk" 26 : 65-86, 1958

13 Reilly, F., "Investment Analysis and Portfolio Management" Dryden 1997

14 Mc Leod, W., "Interpreting the Sharpe ratio when excess returns are negative" 59 : 15-20, 2004

15 Treynor, J. L., "How to rate management of investment funds" 43 : 63-75, 1965

16 Akeda, Y., "Another interpretation of negative Sharpe ratio" 7 : 19-23, 2003

17 Ferruz, L., "An analysis of Spanish investment fund performance: Some considerations concerning Sharpe’s ratio" 32 : 273-284, 2004

18 Israelsen, C., "A refinement to the Sharpe ratio and information ratio" 5 : 423-427, 2005