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Kimball's prudence and two-fund separation as determinants of mutual fund performance evaluation
[working paper]
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Technische Universität Braunschweig, Department Wirtschaftswissenschaften, Institut für Finanzwirtschaft
Abstract
"We consider investors with mean-variance-skewness preferences who aim at selecting one out of F different funds and combining it optimally with the riskless asset and direct stock holdings. Direct stock holdings are either exogenously or endogenously determined. In our theoretical section, we de... view more
"We consider investors with mean-variance-skewness preferences who aim at selecting one out of F different funds and combining it optimally with the riskless asset and direct stock holdings. Direct stock holdings are either exogenously or endogenously determined. In our theoretical section, we derive and discuss several performance measures for the investor’s decision problems with a central role of Kimball’s (1990) prudence and of several variants of Sharpe and Treynor measures. In our empirical section, we show that the distinction between exogenous and endogenous stock holding is less important than the issue of skewness preferences. The latter are most relevant for fund rankings, when an investor’s skewness preferences are not derived from cubic HARA utility so that the two-fund separation theorem is not valid." [author's abstract]... view less
Classification
Financial Planning, Accountancy
Free Keywords
investor specific performance measure; performance evaluation; prudence; skewness preferences
Document language
English
Publication Year
2005
City
Braunschweig
Page/Pages
54 p.
Series
IF Working Paper Series, FW17V4
Handle
https://hdl.handle.net/10419/55255
Status
reviewed
Licence
Deposit Licence - No Redistribution, No Modifications
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