PT  - JOURNAL ARTICLE
AU  - Moshe Levy
AU  - Richard Roll
TI  - Generalized Performance Measures: <em>Optimal Overweighing of Fees Relative to Sample Returns</em>
AID  - 10.3905/jpm.2018.44.3.066
DP  - 2018 Jan 31
TA  - The Journal of Portfolio Management
PG  - 66--75
VI  - 44
IP  - 3
4099  - https://pm-research.com/content/44/3/66.short
4100  - https://pm-research.com/content/44/3/66.full
AB  - Performance measures such as alpha and the Sharpe ratio are typically based on sample returns net of fees. This implies the same weighing to sample returns and to fees. However, sample return parameters are noisy estimates of true parameters, while fees are known with certainty. Thus, intuition suggests that fees should be given more weight than sample returns. The authors formalize this intuition, and derive the optimal overweighing of fees. They show that the resulting generalized performance measures are better predictors of future net performance than the standard performance measures, and they better explain future fund flows.TOPICS: Performance measurement, statistical methods