Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260254 
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 2018:25
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
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
performance
non-Gaussian distributions
cumulants
hedge funds
JEL: 
G11
Document Type: 
Working Paper

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