Performance measurement is an integral part of investment analysis and risk management. The goal of performance measurement is to build a ranking of different investments on the basis of risk-adjusted returns in order to evaluate the relative success of these investments. The Sharpe Ratio is the best-known measure of this type. It considers the first two moments of the return distribution (expected value and standard deviation) and is an adequate performance measure if the returns of the investment fund are normally distributed and the investor wishes to place all his risky assets in just one investment fund. Nevertheless, many other performance measures in addition to the Sharpe ratio exist in theory and practice. One can identify two levels of argumentation for the application of alternative performance measures.
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