Fund Ratings: The Method Reconsidered
| Autor: | Fausto Corradin, Domenico Sartore |
|---|---|
| Rok vydání: | 2014 |
| Předmět: |
Actuarial science
Truncated normal distribution Yield (finance) Counterintuitive Rank (computer programming) Function (mathematics) jel:G24 Standard deviation jel:G11 jel:G14 Ranking Economics Econometrics quadratic utility function positive and negative returns absolute risk aversion Morningstar rating truncated normal distribution incomplete gamma function Italian Pension Fund Incomplete gamma function |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.2516228 |
| Popis: | This paper compares the performance of a quadratic utility function and discusses how to change its characteristic parameter, ARA, so that rating is consistent with return and risk measurements. In particular, this parameter is modified in such a way that a positive return Fund has always a rating higher than one with a negative yield. This modification confirms the possibility of building a new ranking procedure which is more coherent with the actual behaviour of investors.The paper moreover demonstrates that the CRRA utility function has not such behaviour, it is possible therefore a ranking in which a Fund with negative return has a rank greater than a Fund with positive return. This seems counterintuitive with respect to the expectations of investors. The CRRA utility function also shows a very slight link with the standard deviation and, consequently, the induced ranking depends mainly on the returns.The CRRA utility function here considered is that one used by Morningstar. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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