Cvitanic, Jaksa; Lazrak, Ali; Wang, Tan - In: Journal of Economic Dynamics and Control 32 (2008) 5, pp. 1622-1649
We study effects of using Sharpe ratio as a performance measure for compensating money managers in a dynamic market. We demonstrate that the manager's focus on the short horizon is detrimental to the long-horizon investor. When the returns are iid, the performance loss is significant, even when...