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Generalized Information Ratio
| Content Provider | Scilit |
|---|---|
| Author | He, Zhongzhi Lawrence |
| Copyright Year | 2018 |
| Description | Journal: SSRN Electronic Journal This paper proposes the Generalized Information Ratio (GIR) to evaluate the performance of active portfolios under misspecified models. Motivated by the theoretical link between abnormal returns and residual covariance matrix, GIR is derived as alphas scaled by the inverse square root of the residual covariance matrix (GIR = Σ^(-1/2) α). GIR translates residual covariance information into adjusted alphas and nests alphas and Information Ratio as special cases. Simulation results show that GIR is robust to model misspecification and produces stable out-of-sample returns. The gain of using GIR is substantial when the fund pool is large; however, a longer history of fund returns is required for accurate estimation of high-dimensional residual covariance matrix. |
| Related Links | http://arxiv.org/pdf/1803.01381 https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3130422 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.3130422 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2018-02-26 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal Performance Evaluation Mutual Funds Information Ratio Model Misspecification Optimal Transport Mapping Estimation of Covariance Matrix |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |
