a comparative simulation study of strongfundstrong performance measures.pdf

A Comparative Simulation Study of Fund Performance Measures Shafiqur Rahman School of Business Administration Portland State University Portland, Oregon 97207-0751 Shahidur Rahman Department of Economics Kazakhstan Institute of Management Economics and Strategic Research Zhangpeng Gao DBS Bank Ltd Singapore JEL Classification : G0, G1, C1, D4 Key words: Managed Funds, Performance Measure, Market-timing, Return-Based Style Analysis Correspondence Address: Professor Shafiqur Rahman School of Business Administration Portland State University P. O. Box 751 Portland, OR 97207-0751 503.799.9186 (Voice) 503.725.5850 (Fax) rahmans@ A Comparative Simulation Study of Fund Performance Measures ABSTRACT This study critically reviews current fund performance measures. The performance measure derived from the return-based style analysis (RBSA) by Sharpe (1992) is introduced and compared with other regression-based measures. A comparative simulation is set up to test the robustness, accuracy, and efficiency of the alternative measures. The evidence shows that the RBSA measure is superior to other measures. The performance of the simple Jensen measures is sensitive to fund types. More complicated measures, like market-timing measures and multifactor measures show spurious market timing and wrong fund type informatio