A contingent claim approach to performance evaluation

L. R. Glosten, R. Jagannathan*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

100 Scopus citations

Abstract

We show that valuing performance is equivalent to valuing a particular contingent claim on an index portfolio. In general the form of the contingent claim is not known and must be estimated. We suggest approximating the contingent claim by a series of options. We illustrate the use of our method by evaluating the performance of 130 mutual funds during the period 1968-82. We find that the relative performance rank of a fund is rather insensitive to the choice of the index, even though the actual value of the services of the portfolio manager depends on the choice of the index.

Original languageEnglish (US)
Pages (from-to)133-160
Number of pages28
JournalJournal of Empirical Finance
Volume1
Issue number2
DOIs
StatePublished - Jan 1994

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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