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Multi-horizon markowitz portfolio performance appraisals : a general approach

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  • W. Briec
  • K. Kerstens

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article extends the analysis of multi-horizon mean-variance portfolio analysis in the Morey and Morey [Mutual fund performance appraisals: a multi-horizon perspective with endogenous benchmarking. Omega 1999;27:241-58] article in several ways. First, instead of either proportionally contracting risk dimensions or proportionally expanding return dimensions, a more general efficiency measure simultaneously attempts to reduce risk and to expand return over all time periods. Second, a duality relation is established between this generalized multi-horizon efficiency measure and an indirect mean-variance utility function, underscoring the natural interpretation of this generalized efficiency measure in terms of investor's preferences. Furthermore, the need to properly apply time discounting in multi-horizon mean-variance portfolio problems is argued for. An empirical illustration based on the original mutual fund data set in Morey and Morey [Mutual fund performance appraisals: a multi-horizon perspective with endogenous benchmarking. Omega 1999;27:241-58] is added to contrast the new and the original approaches.
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  • W. Briec & K. Kerstens, 2009. "Multi-horizon markowitz portfolio performance appraisals : a general approach," Post-Print hal-00288174, HAL.
    • Handle: RePEc:hal:journl:hal-00288174
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