Analysing the performance of managed funds using the wavelet multiscaling method

✍ Scribed by Francis In; Sangbae Kim; Vijaya Marisetty; Robert Faff

• Book ID: 106516259
• Publisher: Springer US
• Year: 2007
• Tongue: English
• Weight: 292 KB
• Volume: 31
• Category: Article
• ISSN: 0924-865X
• DOI: 10.1007/s11156-007-0061-8

✦ Synopsis

We propose a new approach for investigating the performance of managed funds using wavelet analysis and apply it to an Australian dataset. This method, applied to a multihorizon Sharpe ratio, shows that the wavelet variance at the short scale is higher than that of the longer scale, implying that an investor with a short investment horizon has to respond to every fluctuation in the realized returns, while for an investor with a much longer horizon, the long-run risk associated with unknown expected returns is not as important as the short-run risk. Using multihorizon Sharpe ratios of six groups of managed funds, we find that none of the fund groups are dominant over all time scales.