Benchmarking Measures of Investment Performance with Perfect-Foresight and Bankrupt Asset Allocation Strategies

摘要

It is well known that popular measures of investment performance do not agree on the relative performance of passive portfolios, professionally managed funds, or various asset allocation strategies. The measures also suffer from a number of conceptual and empirical shortcomings. This article shows, by benchmarking the performance measures against two extremes, that the problems are more fundamental. Bankruptcy is the ultimate investment risk-bankrupt asset allocation strategies lose everything. And perfect-foresight asset allocation strategies yield returns beyond anyone's wildest dreams. Yet, many popular measures of investment performance cannot differentiate between them.