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Thomas Fischer . Foto

Thomas Fischer

Docent

Thomas Fischer . Foto

Unequal Returns: Using the Atkinson Index to Measure Financial Risk

Författare

  • Thomas Fischer
  • Frederik Lundtofte

Summary, in English

We apply the Atkinson (1970) inequality index to time series of asset returns to offer a novel measure of financial risk consistent with expected-utility theory. This measure is converted to a certainty-equivalent return serving as a performance measure. We extend the Atkinson index to HARA utility and derive closed-form solutions to our measures for a number of preference-return combinations. Further, we establish relationships between risk aversion and the weights assigned to the cumulants of the return distribution for our performance measure. Using data from hedge funds and asset-pricing anomalies, we find that our performance measure contains additional, economically meaningful information.

Avdelning/ar

  • Nationalekonomiska institutionen

Publiceringsår

2018

Språk

Engelska

Publikation/Tidskrift/Serie

Working Papers

Issue

2018:25

Dokumenttyp

Working paper

Ämne

  • Economics

Nyckelord

  • risk
  • performance
  • non-Gaussian distributions
  • cumulants
  • hedge funds
  • G11

Status

Published