RT Journal Article
SR Electronic
T1 Portfolio Performance Evaluation Using Value at Risk
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 93
OP 102
DO 10.3905/jpm.2003.319898
VO 29
IS 4
A1 Gordon J. Alexander
A1 Alexandre M. Baptista
YR 2003
UL https://pm-research.com/content/29/4/93.abstract
AB Developed here is a value at risk-based measure of portfolio performance called the reward-to-VaR ratio. It is demonstrated that, under normality, the reward-to-VaR ratio gives the same ranking for portfolio performance as the frequently used Sharpe ratio. Under non-normality, the reward-to-VaR ratio at one confidence level may give a ranking for portfolio performance different from the ranking obtained at a different confidence level. This indicates that the risk-taking incentives of a portfolio manager in a VaR-based risk management system can be substantially different from the incentives in a Sharpe ratio-based system.