Referee Report for Economics Manuscript Essay

Different Risk-Adjusted Fund Performance Measures A similitudeSummary This stem compares various risk-adjusted act beaks for a set of usual coin. The authors argue that work bankers bills based on jimmy-at-Risk ( volt-ampere) or Extreme Value Theory (EVT) are more than appropriate than other popular performance measures such(prenominal) as the Sharpe ratio (SR), the Treynor index (TI) or Jensens important (JA) . They propose a performance index similar to the SR and the TI based on losses calculated by means of VaR together with EVT. They find that EVT-VaR measures are more appropriate in the mien of non-normal data.Main Comments The topic of the newspaper publisher is of relevance for financial practitioners as salubrious as academics and it is sure as shooting applicable to the current financial stability context. The paper is as well as generally wellwritten. However, I get down both(prenominal) comments for its improvement. 1. The contri thoion of the paper is no t clearly stated. In the 6th paragraph of the introduction, the authors suggest that their important contribution is the construction of a performance index based on EVT-VAR. However, it is not very clear why the new proposed measure should be better in relation to existing measures as it is now explained. It is dependable that VaR or EVT should be more reliable measures for innate events but when looking at formula (13) it is not apparent why this measure should be more reliable than the traditional measures. The denominator has, in fact, an extreme guide as opposed to the SR or TI which have stringently second moments, so it is not very straight forward to contact these measures.A better job should be done at explaining the implications of such VaR based measure, how it relates to other measures and why it should be better. 2. Why have the measures been compared only in a static way? It is widely cognise in the finance literature that asset return volatility is time-varyin g, and to some extent, also expected returns.It would be possible to go around the last mentioned by arguing market efficiency (which is also questionable) but it is certainly frequently more difficult to argue against time-variability of the standard deviation in the VaR measures (or in the SA and TI ratios). This is very important as the right or bad applicability of a particular performance measure could be sample dependent and as it is now with unconditional measures, this is unenviable to uncover. For instance, while the authors account for non newton 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 full sample and different sub-samples and it should be time-tested whether the measures obtained are significantly different over different samples. 3. The a uthors concentrate on top 10 and bottom 10 monetary resource for their analysis and cast out the other funds for the sake of simplicity. However, by choosing only the cover funds, the authors are giving from the start an advantage to EVT or VaR measures. It would be more appropriate to also report results on (say) 10 mid(prenominal) funds.4. It is not very clear why the top 10 funds show more departures from normality in relation to bottom funds. This determination should be expanded and the lore behind it should be better explained. 1 could argue that losers could be more volatile than winners as the level of precariousness with respect to the fund might increase which could lead 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 value than the top ones, which means that they are more susceptible to extreme events which is clean contradictory with the finding that the top 10 funds exhibit more departures from normality.Moreover, one of the main findings of the study is that the VaR and EVT performance measures perform take up in relation to other measures when there are more departures from normality in returns. A better attempt 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 earlier in the paper and not almost at the end of the introduction as it is now. The contributions should be clearer (see also point 1 above) and should be better think to the existing relevant literature. 2. The conclusion is too long. The concluding remarks should be much shorter and should only summarize 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 sho uld have a short description of the contents to advance reading. As it is now, the reader has to constantly come back to the main text to find out what the contents mean. 4. The figures are hardly visible, they should also be improved and a short explanation should be given.