In this paper, we will investigate whether there is any Sharpe ratio rule or Omega ratio rule that can be used to show that one asset outperforms another asset if it has a higher Sharpe ratio and/or Omega ratio. We find that Sharpe ratio rule could not detect preference of both risk averters and...

Both stochastic dominance and Omegaratio can be used to examine whether the market is efficient, whether there is any arbitrage opportunity in the market and whether there is any anomaly in the market. In this paper, we first study the relationship between stochastic dominance and the Omega...

We explore the association between earnings and price for 400 IFRS adopting firms from eight countries (Australia, France, Germany, Hong Kong, Italy, Singapore, Sweden and the UK) in their annual reports for the years 2005, 2008, 2011 and 2013 (1,577 firm-years). We find no difference in the...

There is a standard trade-off in contracts between the provision of incentives and insurance. We hypothesize that this trade-off influences the precision with which firm performance is measured. We find that firm outcomes are measured less precisely when chance plays a large role in these...

In a mean-downside risk framework, portfolio lines that combine the market portfolio and the risk-free asset (i.e., passive benchmark strategies) are non-linear if the target differs from the risk-free rate. Here, downside risk-based performance measures assign different performance levels to...

An intersection–union test for supporting the hypothesis that a given investment strategy is optimal among a set of alternatives is presented. It compares the Sharpe ratio of the benchmark with that of each other strategy. The intersection–union test takes serial dependence into account and...

Investment performance studies of pension or mutual funds have overall been too statistically inconclusive to create definitive rankings to help investors make fund selection decisions. This paper presents an alternative approach based on comparing the pension or mutual fund firms themselves...

It is common to evaluate mutual fund (and in general, security) returns by linear factor models. However, performance measures from these models are misleading if there are some omitted factors that explain cross-sectional variation in returns. We propose to use a latent-factor approach,...