A B C D E F G H I J K L M N O P Q R S T U V W X Y Z All
Mistry, Janki
- Dealing with the Limitations of the Sharpe Ratio for Portfolio Evaluation
Authors
1 Department of Business and Industrial Management, Veer Narmad South Gujarat University, Surat, Gujarat., IN
Source
Journal of Commerce and Accounting Research, Vol 2, No 3 (2013), Pagination: 10-18Abstract
Portfolio performance evaluation is an important criterion for selecting investment instruments. Traditionally Sharpe, Treynor, and Jensen's Ratios are used to measure the performance of various portfolios, and for comparisons and ranking, Sharpe ratio being the most prominent performance measure. Owing to the limitation of the unrealistic assumption of Sharpe ratio that returns are normally distributed, many exponents have criticized its use as a performance measure. So a need arose to develop alternatives to Sharpe ratio or to put it in other words, overcoming the limitations of Sharpe ratio.More than 100 alternative risk-adjusted performance measures can be identified in literature, most of them attempting to remedy the shortcomings of the Sharpe ratio which relies on normally distributed returns. However, there is a fervent discussion in literature whether the choice of risk-adjusted performance measure actually matters or not.
This paper focuses on the risk-adjusted performance measures which are applied to the return distribution of a portfolio of 6 mutual funds. The funds were first evaluated as per the Sharpe ratio and after it was found that the returns are not normally distributed, the portfolios were evaluated using the Adjusted Sharpe ratio and the Modified Sharpe ratio. It was found from the analysis that in many cases, the adjusted Sharpe ratio and the modified Sharpe ratio provided ranking results which were different from the traditional Sharpe ratio. In certain instances, the rankings were highly correlated to the Sharpe ratio as well as to each other.
Keywords
Sharpe Ratio, Normal Distribution, Adjusted Sharpe Ratio, Modified Sharpe Ratio, Ranks, Skewness, KurtosisReferences
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- An Analysis of Stock Repurchases through Tender Offers-Selected Indian Companies
Authors
1 Department of Business and Industrial and Management , Veer Narmad South Gujarat University, Surat, IN
Source
Global Journal of Research in Management, Vol 4, No 2 (2014), Pagination: 51-74Abstract
Share repurchases are done in order to utilize the free cash reserves of the company. The company may have two options, one is to pay dividends and another is to retain its earnings for future growth. But sometimes, instead of giving out dividends which attract lot of tax, the company decides to go in for a share repurchase. So basically share repurchase is a way to distribute dividends to shareholders. The other prominent reason for a company to announce a share repurchase is undervaluation. The company management feels that the market is undervaluing the company and as a resort to correct this valuation, shares are repurchased at a premium to market price and in most cases, subsequently cancelled out.There are several methods of share repurchase. One of the methods of share repurchase is through tender offers. This study tries to understand the impact of the announcement of repurchase offer through tender offer and its impact on the share price of the tendering company.
In this study, it was found that there were abnormal negative returns for the shareholders after the closure of repurchase. It was also found that there were no abnormal returns to the shareholders pre and post announcement of the repurchase programme.
In comparing the differences in the returns of the three time periods (namely before announcement, after announcement and post closure of announcement), repeated measures ANOVA was used and it was found that there was no significant difference between the returns to shareholders in the three periods. The returns to the shareholders was affected by the number of shares repurchased by the company but not so much by the amount of money spent by the company in repurchasing the shares. It was also found that the returns to shareholders for tender offer companies are significantly different from the returns to shareholders of companies opting for an open market repurchase.