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A COMPARISON OF SOUTH AFRICAN HEDGE FUND RISK MEASURES
Author(s) -
Botha Marius
Publication year - 2007
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2007.00131.x
Subject(s) - sharpe ratio , hedge fund , arbitrage , economics , stochastic dominance , financial economics , alternative investment , dominance (genetics) , actuarial science , monetary economics , business , econometrics , finance , portfolio , market liquidity , biochemistry , chemistry , gene
Although hedge funds have enjoyed unrivalled dominance after years of stellar returns, a combination of low interest rates, sustained economic growth and diminished arbitrage opportunities now threaten them. Distinguishing between funds – an onerous task with notoriously opaque investment strategies – has become paramount in the search for optimal returns. Simple risk and return performance measures cannot cope with the demands of an increasingly complex financial milieu. Interest has thus focused on more effective discriminatory performance measures. The innovative Omega ratio is calculated for South African hedge funds and compared with both Sharpe and Sortino ratios. Omega emerges as the superior measure.