Higher-order Omega: A performance index with a decision-theoretic foundation

B-Tier
Journal: Journal of Banking & Finance
Year: 2019
Volume: 100
Issue: C
Pages: 43-57

Authors (4)

Bi, Hongwei (not in RePEc) Huang, Rachel J. (National Central University) Tzeng, Larry Y. (not in RePEc) Zhu, Wei (not in RePEc)

Score contribution per author:

0.503 = (α=2.01 / 4 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This paper proposes a new performance index referred to as the Nth-order Omega that includes the well-known Omega as a special case. The index is established by adopting an approach that is free of a utility functional form or/and distributional assumptions. A decision-theoretic foundation for our index is further established through introducing a new distribution ranking criterion. The index is monotonic with respect to Nth-degree stochastic dominance and offers a complete ordering on gambles. An empirical example of deriving the optimal hedge ratio is demonstrated to show the applicability of the index.

Technical Details

RePEc Handle
repec:eee:jbfina:v:100:y:2019:i:c:p:43-57
Journal Field
Finance
Author Count
4
Added to Database
2026-02-02