Utility-Adjusted Performance
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In this article, the authors intend to show that the RAP measure of Modigliani and Modigliani (1997) and the GH2 of Graham and Harvey (1997) understate portfolio performance because they fail to take into account the investor’s utility function and degree of risk aversion.
Author: Charles E. Appeadu, Ph.D., CFA & Luis Garcia-Feijoo, Ph.D., CFA
In this article, the authors intend to show that the RAP measure of Modigliani and Modigliani (1997) and the GH2 of Graham and Harvey (1997) understate portfolio performance because they fail to take into account the investor's utility function and degree of risk aversion. In doing so, the authors have created what they call a modified version of RAP which they will demonstrate by evaluating the performance of a set of managed portfolios.
Utility-Adjusted Performance.
