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A post hoc test on the Sharpe ratio

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  • Steven Pav

Abstract

We describe a post hoc test for the Sharpe ratio, analogous to Tukey's test for pairwise equality of means. The test can be applied after rejection of the hypothesis that all population Signal-Noise ratios are equal. The test is applicable under a simple correlation structure among asset returns. Simulations indicate the test maintains nominal type I rate under a wide range of conditions and is moderately powerful under reasonable alternatives.

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  • Steven Pav, 2019. "A post hoc test on the Sharpe ratio," Papers 1911.04090, arXiv.org.
    • Handle: RePEc:arx:papers:1911.04090
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    References listed on IDEAS

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    1. Steven E. Pav, 2019. "Conditional inference on the asset with maximum Sharpe ratio," Papers 1906.00573, arXiv.org, revised Dec 2019.
    2. William F. Sharpe, 1965. "Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 39, pages 119-119.
    3. Chuancun Yin, 2019. "Stochastic Orderings of Multivariate Elliptical Distributions," Papers 1910.07158, arXiv.org, revised Nov 2019.
    4. 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.
    5. 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.
    6. Chuancun Yin, 2019. "Stochastic ordering of Gini indexes for multivariate elliptical random variables," Papers 1908.01943, arXiv.org, revised Sep 2019.
    7. R. E. Odeh & J. O. Evans, 1974. "The Percentage Points of the Normal Distribution," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 23(1), pages 96-97, March.
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