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All About Hedge Funds, Fully Revised Second Edition, 2nd Edition by Ezra Zask

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CHAPTER 12Statistical Measures of Performance

This section reviews the basic statistical measures used by investors in evaluating the performance of hedge funds and other investments. It is important to understand that no one measure by itself, or even a combination of measures, provides all the information needed to evaluate investments; each measure contributes a certain amount of information, but also has its limitations. Investors typically use as many measures as possible to make their investment decisions, in addition to using nonstatistical information.

STANDARD DEVIATION OF RETURNS AS A MEASURE OF RISK

The most basic performance measure is the mean or average return, which is calculated by summing up the periodic returns and dividing ...

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