Abstract
We derive two risk adjusted performance measures for investors with risk averse preferences. Maximizing these measures is equivalent to maximizing the expected utility of an investor. The first measure, X(eff), is derivedassuming a constant risk aversion while the second measure, R(eff),is based on a stronger risk aversion to clustering of losses than of gains. The clustering of returns is captured through a multi-horizon framework. The empirical properties of X(eff), R(eff) are studied within the context of real-time trading models for foreign exchange rates and their properties are compared to those of more traditional measures like the annualized return, the Sharpe Ratio and the maximum drawdown. Our measures are shown to be more robust against clustering of losses and has the ability to fully characterize the dynamic behavior of investment strategies.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
