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A Re-Examination of Sharpe's Ratio for Log-Normal Prices

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  • John Knight
  • Stephen Satchell

Abstract

The purpose of this paper is to examine the exact properties of Sharpe's ratio when prices are log-normal. Depending on the definition of returns, different expressions are formed for unbiased estimators of Sharpe's ratio.

Suggested Citation

  • John Knight & Stephen Satchell, 2005. "A Re-Examination of Sharpe's Ratio for Log-Normal Prices," Applied Mathematical Finance, Taylor & Francis Journals, vol. 12(1), pages 87-100.
    • Handle: RePEc:taf:apmtfi:v:12:y:2005:i:1:p:87-100
    DOI: 10.1080/1350486042000271647
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    References listed on IDEAS

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    1. Jobson, J D & Korkie, Bob M, 1981. "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance, American Finance Association, vol. 36(4), pages 889-908, September.
    2. Knight, John L & Satchell, Stephen E., 1997. "Existence of Unbiased Estimators of the Black/Scholes Option Price, Other Derivatives, and Hedge Ratios," Econometric Theory, Cambridge University Press, vol. 13(6), pages 791-807, December.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    4. He, Hua & Leland, Hayne, 1993. "On Equilibrium Asset Price Processes," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 593-617.
    5. Miller, Robert E. & Gehr, Adam K., 1978. "Sample Size Bias and Sharpe's Performance Measure: A Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(5), pages 943-946, December.
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    Citations

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    Cited by:

    1. Mahesh K.C & Arnab Kumar Laha, 2021. "A Robust Sharpe Ratio," Sankhya B: The Indian Journal of Statistics, Springer;Indian Statistical Institute, vol. 83(2), pages 444-465, November.
    2. John Douglas (J.D.) Opdyke, 2007. "Comparing Sharpe ratios: So where are the p-values?," Journal of Asset Management, Palgrave Macmillan, vol. 8(5), pages 308-336, December.
    3. Francis In & Sangbae Kim & Vijaya Marisetty & Robert Faff, 2008. "Analysing the performance of managed funds using the wavelet multiscaling method," Review of Quantitative Finance and Accounting, Springer, vol. 31(1), pages 55-70, July.

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