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Mutual fund performance in the Swedish premium system - Beyond the mean-variance framework

Håkansson, Rasmus LU (2017) NEKN01 20171
Department of Economics
Abstract
This paper presents an evaluation of the Swedish pension system, using performance measures that accounts for higher moments of the distribution. The aim of this study is to analyze the relationship between the classical Sharpe ratio and more sophisticated measures, while specifically focusing on the outcome of the default fund in the system. These additional measure consists of the ASSR which accounts for relative skewness preference and the GR which is based on the Gini coefficient as the method for measuring risk. This is accomplished by calculating various ratios for all funds with a PPM history dating back to at least 2010 and dividing them into subcategories in order to get a more accurate representation of fund performance within a... (More)
This paper presents an evaluation of the Swedish pension system, using performance measures that accounts for higher moments of the distribution. The aim of this study is to analyze the relationship between the classical Sharpe ratio and more sophisticated measures, while specifically focusing on the outcome of the default fund in the system. These additional measure consists of the ASSR which accounts for relative skewness preference and the GR which is based on the Gini coefficient as the method for measuring risk. This is accomplished by calculating various ratios for all funds with a PPM history dating back to at least 2010 and dividing them into subcategories in order to get a more accurate representation of fund performance within a certain category. The default fund is then benchmarked against its own category and against all other equity funds in the sample. Correlation between measures is determined by firstly assigning ranks to each performance measure and secondly calculating the rank correlation using Spearman’s rho. For the data set used in this study, the results show that the default fund meets its explicit goal of achieving a long term return at least as good as the average of all PPM-funds, given its level of risk. The highest rank correlation is seen between the SR and the ASSR while the lowest correlation is seen between the SR and the GR, a result which fits perfectly in line with what we would expect in theory (Less)
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author
Håkansson, Rasmus LU
supervisor
organization
course
NEKN01 20171
year
type
H1 - Master's Degree (One Year)
subject
keywords
PPM mutual fund performance higher moments Sharpe ratio
language
English
id
8924666
date added to LUP
2017-09-12 11:54:05
date last changed
2017-09-12 11:54:05
@misc{8924666,
  abstract     = {This paper presents an evaluation of the Swedish pension system, using performance measures that accounts for higher moments of the distribution. The aim of this study is to analyze the relationship between the classical Sharpe ratio and more sophisticated measures, while specifically focusing on the outcome of the default fund in the system. These additional measure consists of the ASSR which accounts for relative skewness preference and the GR which is based on the Gini coefficient as the method for measuring risk. This is accomplished by calculating various ratios for all funds with a PPM history dating back to at least 2010 and dividing them into subcategories in order to get a more accurate representation of fund performance within a certain category. The default fund is then benchmarked against its own category and against all other equity funds in the sample. Correlation between measures is determined by firstly assigning ranks to each performance measure and secondly calculating the rank correlation using Spearman’s rho. For the data set used in this study, the results show that the default fund meets its explicit goal of achieving a long term return at least as good as the average of all PPM-funds, given its level of risk. The highest rank correlation is seen between the SR and the ASSR while the lowest correlation is seen between the SR and the GR, a result which fits perfectly in line with what we would expect in theory},
  author       = {Håkansson, Rasmus},
  keyword      = {PPM mutual fund performance higher moments Sharpe ratio},
  language     = {eng},
  note         = {Student Paper},
  title        = {Mutual fund performance in the Swedish premium system - Beyond the mean-variance framework},
  year         = {2017},
}