IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v32y1986i11p1410-1421.html
   My bibliography  Save this article

The Effects of the Sample Size, the Investment Horizon and Market Conditions on the Validity of Composite Performance Measures: A Generalization

Author

Listed:
  • Son-Nan Chen

    (College of Business & Management, University of Maryland, College Park, Maryland 20742)

  • Cheng F. Lee

    (School of Business, University of Illinois at Urbana-Champaign, Urbana, Illinois 61801)

Abstract

In our previous study, the empirical relationship between Sharpe measure and its risk proxy was shown to be dependent on the sample size, the investment horizon and market conditions. This important result is generalized in the present study to include Treynor and Jensen performance measures. Moreover, it is shown that the conventional sample estimate of ex-ante Treynor measure is biased. As a result, the ranking of mutual fund performance based on the biased estimate is not an unbiased ranking as implied by the ex-ante Treynor measure. In addition, a significant relationship between the estimated Jensen measure and its risk proxy may produce a potential bias associated with the cumulative average residual technique which is frequently used for testing the market efficiency hypothesis. Finally, the impact of the dependence between risk and average return in Friend and Blume's findings is also investigated.

Suggested Citation

  • Son-Nan Chen & Cheng F. Lee, 1986. "The Effects of the Sample Size, the Investment Horizon and Market Conditions on the Validity of Composite Performance Measures: A Generalization," Management Science, INFORMS, vol. 32(11), pages 1410-1421, November.
    • Handle: RePEc:inm:ormnsc:v:32:y:1986:i:11:p:1410-1421
    DOI: 10.1287/mnsc.32.11.1410
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.32.11.1410
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.32.11.1410?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Darolles, Serge & Gourieroux, Christian, 2010. "Conditionally fitted Sharpe performance with an application to hedge fund rating," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 578-593, March.
    2. Chiou, Wan-Jiun Paul & Lee, Alice C. & Lee, Cheng-Few, 2010. "Stock return, risk, and legal environment around the world," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 95-105, January.
    3. Mahmoud Haddad & Ghassem Homaifar & Said Elfakhani & Hikmat Ahmedov, 2008. "Intertemporal Test of Beta Stationarity Performance of Islamic Sector Structured Mutual Funds," Working Papers 427, Economic Research Forum, revised 09 Jan 2008.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:32:y:1986:i:11:p:1410-1421. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.