Refinements to the Sharpe Ratio - Evidence from Malaysian Equity Funds

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 t...

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Bibliographic Details
Published inGlobal economic review Vol. 42; no. 1; pp. 72 - 97
Main Authors Low, Soo-Wah, Chin, Yi-Bing
Format Journal Article
LanguageEnglish
Published Abingdon Taylor & Francis Group 01.03.2013
Taylor & Francis Ltd
동서문제연구원
Subjects
degree of leverage
Economic methodology
Equity
equity fund performance
Equity funds
Investment effectiveness
Investment funds
Investment returns
M-squared
Malaysia
Measurement
Mutual funds
Portfolio performance
Ranking
Risk
Sharpe ratio
경제학
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Summary: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.
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ISSN:1226-508X
1744-3873
DOI:10.1080/1226508X.2013.769818