Referee Report for Economics Manuscript Essay

Different Risk-Adjusted Fund Performance Measures A ComparisonSummary This makeup compares motley risk-adjusted slaying nebs for a set of coarse money. The authors get by that exploit measures ground on Value-at-Risk (var) or Extreme Value supposition (EVT) are more(prenominal) get than new(prenominal)(a) popular exerciseance measures such as the Sharpe ratio (SR), the Treynor index (TI) or Jensens Alpha (JA) . They propose a performance index similar to the SR and the TI based on losses mensurable by means of volt-ampere together with EVT. They find that EVT-VaR measures are more appropriate in the presence of non-normal data.Main Comments The matter of the paper is of relevance for financial practitioners as well as academics and it is sure as shooting relevant to the current financial stability context. The paper is alike generally wellwritten. However, I afford some comments for its improvement. 1. The contribution of the paper is non draw inly stated. In the 6th divide of the introduction, the authors suggest that their of import contribution is the kink of a performance index based on EVT-VAR. However, it is not very clear wherefore the new proposed measure should be advance in relation to real measures as it is now explained. It is true that VaR or EVT should be more good measures for extreme events but when looking at formula (13) it is not apparent why this measure should be more original than the traditional measures. The denominator has, in fact, an extreme feed as opposed to the SR or TI which wear strictly bite moments, so it is not very consecutive forward to relate these measures.A better job should be done at explaining the implications of such VaR based measure, how it relates to different measures and why it should be better. 2. Why have the measures been compared nevertheless in a silent way? It is widely known in the finance literature that asset fruit irritability is time-varying, and to some exten t, in like manner judge returns.It would be possible to go near the latter by arguing mart efficiency (which is also questionable) but it is certainly much more difficult to argue against time-variability of the standard parenthesis in the VaR measures (or in the SA and TI ratios). This is very primary(prenominal) as the good or large applicability of a particular performance measure could be sample open and as it is now with unconditional measures, this is solid to unc over. For instance, while the authors account for non normality of returns in the modified-VaR measure by means of a Corner-Fisher quantile,they assume a constant standard deviation which means that in periods of high volatility they could still understate the VaR. So at the minimum, the performance comparisons should be done for the in effect(p) sample and different sub-samples and it should be well-tried whether the measures obtained are significantly different over different samples. 3. The authors conce ntrate on pass by 10 and foundation 10 currency for their analysis and discarded the other gold for the sake of simplicity. However, by choosing only the tail cash, the authors are giving from the skip an advantage to EVT or VaR measures. It would be more appropriate to also advertise numbers on (say) 10 mid funds.4. It is not very clear why the enlighten 10 funds show more departures from normality in relation to bottom funds. This finding should be expanded and the erudition behind it should be better explained. unrivalled could argue that losers could be more quicksilver(a) than winners as the level of uncertainty with gaze to the fund might increase which could return to more extreme returns. In fact, in the 3rd paragraph of the empirical result section it says the bottom 10 funds have, in general, higher VaR determine than the top ones, which means that they are more susceptible to extreme events which is somewhat strange with the finding that the top 10 funds e xhibit more departures from normality.Moreover, one of the main findings of the study is that the VaR and EVT performance measures perform best in relation to other measures when there are more departures from normality in returns. A better assay to reconcile the findings of nonnormality, the winner vs. looser funds and the results on the performance measures with some previous studies or satisfactory intuition should be done. other comments 1. The contributions of the paper should be stated in front in the paper and not nigh at the end of the introduction as it is now. The contributions should be clearer (see also point 1 above) and should be better related to the lively relevant literature. 2. The conclusion is too long. The terminal remarks should be much improvidenter and should only re-start the main findings and reconcile them with the issues raised in the introduction as well as highlight possible extensions for future work.3. The tables should also be improved. They s hould have a poor description of the contents to facilitate reading. As it is now, the reader has to constantly come underpin to the main text to find out(p) what the contents mean. 4. The figures are hardly visible, they should also be improved and a short explanation should be given.