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On the Jensen Measure and Marginal Improvements in Portfolio Performance: A Note


  • J. D. JOBSON,


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    • Both authors from the University of Alberta. This paper was completed while Korkie was on study leave at McGill University's Faculty of Management and Department of Statistics.


The marginal performance contribution made by new assets in a portfolio is identified. The maximum change in a portfolio's Sharpe performance from the addition of new assets is a simple function of a generalized Jensen index and the unexplained covariances from a multivariate market model. Deviations from a higher dimension market line may be used to rank the desirability of asset additions to an existing portfolio. Statistical tests for the equality of the performance contributions by new assets is possible.

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