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Differential Information and Performance Measurement Using a Security Market Line
Author(s) -
DYBVIG PHILIP H.,
ROSS STEPHEN A.
Publication year - 1985
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1985.tb04963.x
Subject(s) - asset (computer security) , variance (accounting) , observer (physics) , portfolio , line (geometry) , security market , econometrics , information security , differential (mechanical device) , computer science , economics , mathematics , financial economics , computer security , finance , engineering , accounting , physics , geometry , quantum mechanics , aerospace engineering
An uninformed observer using the tools of mean variance and security market line analysis to measure the performance of a portfolio manager who has superior information is unlikely to be able to make any reliable inferences. While some positive results of a very limited nature are possible, e.g., when there is a riskless asset or when information is restricted to be “security specific,” in general anything is possible. In particular, a manager with superior information can appear to the observer to be below or above the security market line and inside or outside of the mean‐variance efficient frontier, and any combination of these is possible.