Is there evidence that Omega is popular in practice?

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davidlk
Posts: 2
Joined: Tue May 15, 2012 3:32 pm

Is there evidence that Omega is popular in practice?

Postby davidlk » Wed Aug 15, 2012 4:08 pm

First, I want to say that Professor Alexander's books are great - top notch. I found them extremely useful as references for a masters-level course that I taught at the Univ. of Michigan - Quantitative Risk Management.

I want to know something about the popularity of Omega:

Volume I addresses (last bullet on back cover of book) risk adjusted performance measures, like Omega. On p. 265: "Currently there is much debate among fund managers and academics about the appropriate choice of kappa index and threshold." (Omega has the same information as Kappa index with threshold one.) In my industry experience, at RiskMetrics Group, we received inquiries about Omega. I am curious though, is there evidence (preferably in some top literature) that Omega is actually popular in practice. If indeed there is "much debate," I would appreciate some references. Thank you!

coalexander
Posts: 815
Joined: Sun Sep 28, 2008 10:30 pm

Re: Is there evidence that Omega is popular in practice?

Postby coalexander » Sun Aug 26, 2012 2:21 pm

Hiya

Thanks for nice comment about the books :-)

I don't know of any survey about use of Omega by fund managers but my husband has just published a long paper that evaluates the various merits of different performance criteria -- will upload it here later today or tomorrow.

Omega has a one-to-one mapping with the probability distribution of returns, so contained exactly the same information as that. But this information is far more than other performance criteria which are generally based on just the first few moments of returns (eg Sharpe ratio (SR) just looks at the mean and variance of the distribution). By contrast, omega can be used to make decisions based on stochastic dominance, which SR cannot. I recommend you read my husband's paper...as I said, I'll upload it here soon,

Cheers, Carol

davidlk
Posts: 2
Joined: Tue May 15, 2012 3:32 pm

Re: Is there evidence that Omega is popular in practice?

Postby davidlk » Mon Sep 10, 2012 8:07 pm

I would appreciate that. (I don't see the paper yet, but perhaps it is me.)

coalexander
Posts: 815
Joined: Sun Sep 28, 2008 10:30 pm

Re: Is there evidence that Omega is popular in practice?

Postby coalexander » Tue Sep 11, 2012 3:05 pm

Sorry, I can't upload it as the board quota has been reached -- need to sort this out but meanwhile can you send me an email and I'll attach it the old fashioned way? Cheers, Carol


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