Risk-adjusted performance measures are frequently used to rank investment opportunities. For example, ranking mutual funds is a popular tool in assisting investors with their investment choices, and these rankings are often based on risk adjusted performance measures. The suggestion implicit in such a ranking is that the first fund is the best fund. The ranking methods differ due to different choices for the

return and risk measures as well as the way of adjusting for risk. The justification of a ranking depends on the rationale behind the ranking criterion. For example, a ranking based on the mean geometric return ranks investment opportunities according to the increase in wealth of the investor. Such a measure can be motivated by assuming that the investor wants to maximize future wealth, regardless of risk as measured by volatility. Risk-adjusted performance measures can be motivated by assuming that investors are risk averse and need to be compensated for being exposed to risk. Therefore, the choice of the appropriate performance measure should be determined, at least partially, by the preference function of the investor.

The choice of a performance measure may also be justified by other considerations. A frequently used justification of a performance measure is its ability to identify the investment skills of portfolio managers.

usually, individual investors do not make extensive efforts to formulate formal preference functions of their own behavior. Often, they rely on the help of financial planners, who assist their clients in identifying their risk attitudes. Investors may use, for example, questionnaires focussing on their behavior in hypothetical risky choices, life-style factors, or other factors affecting risk attitudes. However, there is a large

group of individuals that do not rely on the help of financial advisors at all. Instead, they may seek help from popular financial magazines or other sources of information on mutual funds, such as Morningstar or Micropal. These sources typically provide investors with rankings of mutual funds based on risk-adjusted performance measures. A risk-adjusted performance measure generally corrects the average return

of a mutual fund for the level of risk. The risk-adjustment procedure is an implicit way of modeling risk attitudes. An individual using a ranking based on such a measure adheres to the risk attitudes implicit in the performance measure. Therefore, by using this risk-adjusted performance measure, the individual sacrifices the opportunity to implement his individual risk attitudes. Consequently, it is important to study the implied risk attitudes of these performance measures. In doing so, we try to achieve a general classification of risk-adjusted performance measures into those that correspond to a low degree of risk aversion and those that correspond to a high degree of risk aversion. Using a performance measure rather than a preference function also simplifies the problem of an investor who does not want to model his formal preference function. Such an investor only needs to calibrate his risk preferences in terms of a high versus a low level of risk aversion and select the appropriate ranking device.

Following are the types of wage incentive plans.

They can be diagrammatically represented as below:

1. Straight Piece Rate Plan:

Under the straight piece rate plan workers are paid based on their output. For example, if the piece rate is Rs. 4 per piece of the product, then a worker who turns out 40 pieces/day earns Rs. 160 (Rs. 4 x 40) as his wage for that day. Whereas another employee who produces 32 pieces/ day earns Rs. 128 (Rs. 4 x 32 pieces). Hence a fast worker earns more compared to the slow worker.

Advantages:

i. Motivates the workers to increase their output.

ii. Simple and easy to understand.

iii. improve productivity.

Disadvantages:

i. No guaranteed minimum wage. This makes workers insecure.

ii. Great disparity of earning between slow and fast workers.

iii. Wastage