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An alternative approach for portfolio performance evaluation: enabling fund evaluation relative to peer group via Malkiel’s monkey

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  • Yongjae Lee
  • Do-Gyun Kwon
  • Woo Chang Kim
  • Frank J. Fabozzi

Abstract

We propose an implementable portfolio performance evaluation procedure that compares a portfolio with respect to the portfolios constructed by an infinite number of Malkiel’s blindfolded monkeys, or equivalently the whole enumeration of all possible portfolios. We argue that this approach exhibits two main advantages. First, it does not require any benchmark portfolios because a portfolio is being compared to an infinite number of portfolios. Second, it is market condition invariant. Since the market conditions are already reflected in the portfolio performances of an infinite blindfolded monkeys, our measure of portfolio performances is invariant to volatile market conditions.

Suggested Citation

  • Yongjae Lee & Do-Gyun Kwon & Woo Chang Kim & Frank J. Fabozzi, 2018. "An alternative approach for portfolio performance evaluation: enabling fund evaluation relative to peer group via Malkiel’s monkey," Applied Economics, Taylor & Francis Journals, vol. 50(40), pages 4318-4327, August.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:40:p:4318-4327
    DOI: 10.1080/00036846.2018.1444263
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    Cited by:

    1. Yongjae Lee & Woo Chang Kim & Jang Ho Kim, 2020. "Achieving Portfolio Diversification for Individuals with Low Financial Sustainability," Sustainability, MDPI, vol. 12(17), pages 1-16, August.
    2. Cyril Bachelard & Apostolos Chalkis & Vissarion Fisikopoulos & Elias Tsigaridas, 2024. "Randomized Control in Performance Analysis and Empirical Asset Pricing," Papers 2403.00009, arXiv.org.

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