Inference for the Sharpe Ratio Using a Likelihood-Based Approach
The Sharpe ratio is the prominent risk-adjusted performance measure used by practitioners. Statistical testing of this ratio using its asymptotic distribution has lagged behind its use. In this paper, highly accurate likelihood analysis is applied for inference on the Sharpe ratio. Both the one- and...
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| Format: | Article |
| Language: | English |
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Wiley
2012-01-01
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| Series: | Journal of Probability and Statistics |
| Online Access: | http://dx.doi.org/10.1155/2012/878561 |
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| _version_ | 1832561698388574208 |
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| author | Ying Liu Marie Rekkas Augustine Wong |
| author_facet | Ying Liu Marie Rekkas Augustine Wong |
| author_sort | Ying Liu |
| collection | DOAJ |
| description | The Sharpe ratio is the prominent risk-adjusted performance measure used by practitioners. Statistical testing of this ratio using its asymptotic distribution has lagged behind its use. In this paper, highly accurate likelihood analysis is applied for inference on the Sharpe ratio. Both the one- and two-sample problems are considered. The methodology has O(n−3/2) distributional accuracy and can be implemented using any parametric return distribution structure. Simulations are provided to demonstrate the method's superior accuracy over existing methods used for testing in the literature. |
| format | Article |
| id | doaj-art-4152346d18154e70ab50a4bee72f887a |
| institution | Kabale University |
| issn | 1687-952X 1687-9538 |
| language | English |
| publishDate | 2012-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Probability and Statistics |
| spelling | doaj-art-4152346d18154e70ab50a4bee72f887a2025-02-03T01:24:26ZengWileyJournal of Probability and Statistics1687-952X1687-95382012-01-01201210.1155/2012/878561878561Inference for the Sharpe Ratio Using a Likelihood-Based ApproachYing Liu0Marie Rekkas1Augustine Wong2Department of Economics, York University, 4700 Keele Street, Toronto, ON, M3J 1P3, CanadaDepartment of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, CanadaDepartment of Mathematics and Statistics, York University, 4700 Keele Street, Toronto, ON, M3J 1P3, CanadaThe Sharpe ratio is the prominent risk-adjusted performance measure used by practitioners. Statistical testing of this ratio using its asymptotic distribution has lagged behind its use. In this paper, highly accurate likelihood analysis is applied for inference on the Sharpe ratio. Both the one- and two-sample problems are considered. The methodology has O(n−3/2) distributional accuracy and can be implemented using any parametric return distribution structure. Simulations are provided to demonstrate the method's superior accuracy over existing methods used for testing in the literature.http://dx.doi.org/10.1155/2012/878561 |
| spellingShingle | Ying Liu Marie Rekkas Augustine Wong Inference for the Sharpe Ratio Using a Likelihood-Based Approach Journal of Probability and Statistics |
| title | Inference for the Sharpe Ratio Using a Likelihood-Based Approach |
| title_full | Inference for the Sharpe Ratio Using a Likelihood-Based Approach |
| title_fullStr | Inference for the Sharpe Ratio Using a Likelihood-Based Approach |
| title_full_unstemmed | Inference for the Sharpe Ratio Using a Likelihood-Based Approach |
| title_short | Inference for the Sharpe Ratio Using a Likelihood-Based Approach |
| title_sort | inference for the sharpe ratio using a likelihood based approach |
| url | http://dx.doi.org/10.1155/2012/878561 |
| work_keys_str_mv | AT yingliu inferenceforthesharperatiousingalikelihoodbasedapproach AT marierekkas inferenceforthesharperatiousingalikelihoodbasedapproach AT augustinewong inferenceforthesharperatiousingalikelihoodbasedapproach |