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Theory and Application of an Economic Performance Measure of Risk

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Niu, Cuizhen and Guo, Xu and McAleer, Michael and Wong, Wing-Keung (2017) Theory and Application of an Economic Performance Measure of Risk. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 18, 2017, ] (Unpublished)

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Abstract

Homm and Pigorsch (2012a) use the Aumann and Serrano index to develop a new economic performance measure (EPM), which is well known to have advantages over other measures. In this paper, we extend the theory by constructing a one-sample confidence interval of EPM, and construct confidence intervals for the difference of EPMs for two independent samples. We also derive the asymptotic distribution for EPM and for the difference of two EPMs when the samples are independent. We conduct simulations to show the proposed theory performs well for one and two independent samples. The simulations show that the proposed approach is robust in the dependent case. The theory developed is used to construct both onesample and two-sample confidence intervals of EPMs for Singapore and USA stock indices.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Economic performance measure; Asymptotic confidence interval; Bootstrapbased confidence interval; Method of variance estimates recovery.
Subjects:Sciences > Mathematics
Sciences > Mathematics > Mathematical statistics
Social sciences > Economics > Econometrics
JEL:C12, C15
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2017
Number:18
ID Code:43464
Deposited On:20 Jun 2017 12:29
Last Modified:20 Jun 2017 12:29

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