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Unequal Returns: Using the Atkinson Index to Measure Financial Risk
- Source :
- Fischer, T & Lundtofte, F 2020, ' Unequal returns : Using the Atkinson index to measure financial risk ', Journal of Banking & Finance, vol. 116, 105819 . https://doi.org/10.1016/j.jbankfin.2020.105819
- Publication Year :
- 2017
- Publisher :
- Elsevier BV, 2017.
-
Abstract
- We apply the Atkinson (1970) inequality index to time series of asset returns to offer a novel measure of financial risk consistent with expected-utility theory. This measure is converted to a certainty-equivalent return serving as a performance measure. We extend the Atkinson index to HARA utility and derive closed-form solutions to our measures for a number of preference-return combinations. Further, we establish relationships between risk aversion and the weights assigned to the cumulants of the return distribution for our performance measure. Using data from hedge funds and asset-pricing anomalies, we find that our performance measure contains additional, economically meaningful information.
- Subjects :
- Risk
Economics and Econometrics
050208 finance
Index (economics)
Series (mathematics)
Non-Gaussian distributions
Risk aversion
business.industry
Performance
Financial risk
05 social sciences
Cumulants
Measure (mathematics)
Hedge fund
Atkinson index
Hedge funds
0502 economics and business
Econometrics
050207 economics
business
Cumulant
Finance
Mathematics
Subjects
Details
- ISSN :
- 15565068
- Database :
- OpenAIRE
- Journal :
- SSRN Electronic Journal
- Accession number :
- edsair.doi.dedup.....4216ac2993fe8b809f8a7ee506224a56