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Stock Performance Evaluation Incorporating High Moments and Disaster Risk: Evidence from Japan

Author

Listed:
  • Jiro Hodoshima

    (NUCB Business School)

  • Tetsuya Misawa

    (Nagoya City University)

  • Yoshio Miyahara

    (Nagoya City University)

Abstract

We compare performance evaluation of the TOPIX Core 30 of Japanese stocks by the performance evaluation index based on the economic index of riskiness of Aumann and Serrano (J Polit Econ 116:810–836, 2008) and the Sharpe ratio. The performance index of Aumann and Serrano, which can take into account high moments and disaster risk, is more relevant for risk-averse investors than the Sharpe ratio. The two performance indexes are, unlike the U.S. stocks, surprising similar in the majority of the stocks studied. However, there do exist contrasting stocks where the two performance indexes differ considerably, reflecting the underlying performance of stocks. Use of the two performance indexes together can result in better characterization of stocks.

Suggested Citation

  • Jiro Hodoshima & Tetsuya Misawa & Yoshio Miyahara, 2020. "Stock Performance Evaluation Incorporating High Moments and Disaster Risk: Evidence from Japan," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 27(2), pages 155-174, June.
    • Handle: RePEc:kap:apfinm:v:27:y:2020:i:2:d:10.1007_s10690-019-09287-z
    DOI: 10.1007/s10690-019-09287-z
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    References listed on IDEAS

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    2. Robert J. Aumann & Roberto Serrano, 2008. "An Economic Index of Riskiness," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 810-836, October.
    3. Jiro Hodoshima & Nana Otsuki, 2019. "Evaluation by the Aumann and Serrano performance index and Sharpe ratio: Bitcoin performance," Applied Economics, Taylor & Francis Journals, vol. 51(39), pages 4282-4298, August.
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    10. Jiro Hodoshima, 2019. "Stock performance by utility indifference pricing and the Sharpe ratio," Quantitative Finance, Taylor & Francis Journals, vol. 19(2), pages 327-338, February.
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    Cited by:

    1. Lu, Richard & Horng, Tzyy-Leng & Horng, Min-Sun & Wang, Amy Z.-H., 2023. "A performance evaluation of portfolio insurance under the Black and Scholes framework: An application of the economic index of riskiness," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 269-276.
    2. Yoshio Miyahara, 2022. "Both Sensitive Value Measure and its Applications," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(2), pages 357-379, June.

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    More about this item

    Keywords

    Aumann and Serrano performance index; GMM estimation; Japanese stocks;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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