An Empirical Study of a New Risk Index Riskiness"" on Mutual Fund in Taiwan""
Date Issued
2015
Date
2015
Author(s)
Kuo, Jen-Yu
Abstract
This research employs a new risk index “Riskiness” proposed by Aumann and Serrano (2008). “Riskiness” contains a lot of good characters including duality, positive homogeneity, first-order stochastic dominance and second-order stochastic dominance. In this paper, we apply “Riskiness” on the performance measure of mutual fund in Taiwan. Currently, people usually use Sharpe ratio as a performance measure index which only considers mean and variance. However, the new performance measure index accounts for not only mean and variance but also higher moments of the return distribution, skewness and kurtosis. It can measure left-tailed extreme risk which most investors care about. We choose five categories of mutual fund in Taiwan, three of them are equity fund, the other two are balanced fund. By ranking and comparing the results of Sharpe ratio and the new index in each category, we can find out which one is better to measure performance. Research results illustrate that the ranking of Sharpe ratio and the new index on equity fund is more different from that on balanced fund. Moreover, the ranking of both indexes are almost identical on balanced fund due to low extreme risk. It is more evident to apply “Riskiness” on high-risk assets.
Subjects
Risk index
Mutual fund
Skewness
Kurtosis
Type
thesis