Investor-specific Performance Measurement - A Justification of Sharpe Ratio and Treynor Ratio

This article defines the investor-specific performance measure ISM necessary for investors in practically relevant decision situations. In such situations a typical investor creates an overall protfolio consisting of three parts: an arbitrary fund, a risk-free asset and an existing, fixed portfolio. Since the ISM is considerably definded by the Sharpe ration and the Treynor ratio, an economic justification of these traditional performance measueres is also presented here.