Refinements to the Sharpe Ratio - Evidence from Malaysian Equity Funds

Soo Wah Low, Yi Bing Chin

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

We apply M-squared measure to evaluate the performance of Malaysian equity funds. Specifically, we show how financial leverage can be applied to increase the returns or to reduce the risk exposures of funds. Several alternative refinements to the original Sharpe ratio are also employed to evaluate the funds during periods of negative excess returns. We find that modified versions of Sharpe measure generally lead to similar performance rankings as the original Sharpe ratio. Our findings imply that while Sharpe ratio has experienced several methodological improvements, its basic underlying concept remains remarkably intact.

Original languageEnglish
Pages (from-to)72-97
Number of pages26
JournalGlobal Economic Review
Volume42
Issue number1
DOIs
Publication statusPublished - Mar 2013

Fingerprint

equity
basic concept
performance
evidence
ranking
Sharpe ratio
Equity
Financial leverage
Ranking
Risk exposure
Excess returns

Keywords

  • degree of leverage
  • equity fund performance
  • M-squared
  • Sharpe ratio

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Business and International Management
  • Political Science and International Relations

Cite this

Refinements to the Sharpe Ratio - Evidence from Malaysian Equity Funds. / Low, Soo Wah; Chin, Yi Bing.

In: Global Economic Review, Vol. 42, No. 1, 03.2013, p. 72-97.

Research output: Contribution to journalArticle

@article{ab5375a847ab4269a66ca852b130e5ee,
title = "Refinements to the Sharpe Ratio - Evidence from Malaysian Equity Funds",
abstract = "We apply M-squared measure to evaluate the performance of Malaysian equity funds. Specifically, we show how financial leverage can be applied to increase the returns or to reduce the risk exposures of funds. Several alternative refinements to the original Sharpe ratio are also employed to evaluate the funds during periods of negative excess returns. We find that modified versions of Sharpe measure generally lead to similar performance rankings as the original Sharpe ratio. Our findings imply that while Sharpe ratio has experienced several methodological improvements, its basic underlying concept remains remarkably intact.",
keywords = "degree of leverage, equity fund performance, M-squared, Sharpe ratio",
author = "Low, {Soo Wah} and Chin, {Yi Bing}",
year = "2013",
month = "3",
doi = "10.1080/1226508X.2013.769818",
language = "English",
volume = "42",
pages = "72--97",
journal = "Global Economic Review",
issn = "1226-508X",
publisher = "Routledge",
number = "1",

}

TY - JOUR

T1 - Refinements to the Sharpe Ratio - Evidence from Malaysian Equity Funds

AU - Low, Soo Wah

AU - Chin, Yi Bing

PY - 2013/3

Y1 - 2013/3

N2 - We apply M-squared measure to evaluate the performance of Malaysian equity funds. Specifically, we show how financial leverage can be applied to increase the returns or to reduce the risk exposures of funds. Several alternative refinements to the original Sharpe ratio are also employed to evaluate the funds during periods of negative excess returns. We find that modified versions of Sharpe measure generally lead to similar performance rankings as the original Sharpe ratio. Our findings imply that while Sharpe ratio has experienced several methodological improvements, its basic underlying concept remains remarkably intact.

AB - We apply M-squared measure to evaluate the performance of Malaysian equity funds. Specifically, we show how financial leverage can be applied to increase the returns or to reduce the risk exposures of funds. Several alternative refinements to the original Sharpe ratio are also employed to evaluate the funds during periods of negative excess returns. We find that modified versions of Sharpe measure generally lead to similar performance rankings as the original Sharpe ratio. Our findings imply that while Sharpe ratio has experienced several methodological improvements, its basic underlying concept remains remarkably intact.

KW - degree of leverage

KW - equity fund performance

KW - M-squared

KW - Sharpe ratio

UR - http://www.scopus.com/inward/record.url?scp=84875321490&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84875321490&partnerID=8YFLogxK

U2 - 10.1080/1226508X.2013.769818

DO - 10.1080/1226508X.2013.769818

M3 - Article

AN - SCOPUS:84875321490

VL - 42

SP - 72

EP - 97

JO - Global Economic Review

JF - Global Economic Review

SN - 1226-508X

IS - 1

ER -