Computing the Substantial-Gain-Loss-Ratio

Voelzke Jan, Mentemeier Sebastian

Zusammenfassung

The Substantial-Gain-Loss-Ratio (SGLR) was developed to over-come some drawbacks of the Gain-Loss-Ratio (GLR) as proposed by Bernardoand Ledoit (2000). This is achieved by slightly changing the condition for aGood-Deal, i. e. on the most extreme but at the same time very small part ofthe state space.As an empirical performance measure the SGLR can naturally handle out-liers and is not easily manipulated. Additionally, the robustness of performanceis illuminated via so-called β-diagrams.In the present paper we propose an algorithm for the computation of theSGLR in empirical applications and discuss its potential usage for theoreticalmodels as well. Finally, we present two exemplary applications of an SGLR-analysis on historic returns.