A Jigsaw Puzzle of Basic Risk-adjusted Performance Measures

Scholz H, Wilkens M (2005)


Publication Language: English

Publication Type: Journal article

Publication year: 2005

Journal

Publisher: Spaulding Group

Book Volume: 9

Pages Range: 57-64

Journal Issue: Spring

Abstract

In 1997, Modigliani and Modigliani developed the risk-adjusted performance measure RAP (often called M-squared), which is now widely accepted in theory and practice. Their measure has further increased investorawareness of risk-adjusted performance measurement. However, this measure uses the standard deviation as the relevant measure of risk, and, therefore, is relevant only to investors who invest their entire savings into a singlefund. In this article the authors present a jigsaw puzzle of basic risk-adjusted performance measures, which helpsto better understand the key links between these measures. In doing so they include a hardly known measure: the market risk-adjusted performance (MRAP). While closely related to the Modigliani measure, the MRAP measures returns relative to market risk instead of total risk. Thus, the MRAP is suitable for investors who invest in many different assets.

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How to cite

APA:

Scholz, H., & Wilkens, M. (2005). A Jigsaw Puzzle of Basic Risk-adjusted Performance Measures. Journal of Performance Measurement, 9(Spring), 57-64.

MLA:

Scholz, Hendrik, and Marco Wilkens. "A Jigsaw Puzzle of Basic Risk-adjusted Performance Measures." Journal of Performance Measurement 9.Spring (2005): 57-64.

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