Performance Evaluation,Portfolio Selection, and HARA Utility

Our main goal is the generalization of the approach of Jobson and Korkie(1984) forfunds performance evaluation. Therefore, we consider the portfolio selection problem of aninvestor who faces short sales restrictions when choosing among F different investment fundsand assume the investor's utility function to be of the HARA type. We develop a performancemeasure and discuss its relationships to Treynor(1965), Sharpe(1966), Jensen(1968), Prakashand Bear(1986), and Grinblatt and Titman(1989). Particular attention is given to the specialcase of cubic utility implying skewness preferences. Our findings are illustrated by an empiri-cal example.