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Inference on Achieved Signal Noise Ratio

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  • Steven E. Pav

Abstract

We describe a procedure to perform approximate inference on the achieved signal-noise ratio of the Markowitz Portfolio under Gaussian i.i.d. returns. The procedure relies on a statistic similar to the Sharpe Ratio Information Criterion. Testing indicates the procedure is somewhat conservative, but otherwise works well for reasonable values of sample and asset universe sizes. We adapt the procedure to deal with generalizations of the portfolio optimization problem.

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  • Steven E. Pav, 2020. "Inference on Achieved Signal Noise Ratio," Papers 2005.06171, arXiv.org, revised May 2020.
    • Handle: RePEc:arx:papers:2005.06171
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    References listed on IDEAS

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    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Steven E. Pav, 2014. "Bounds on Portfolio Quality," Papers 1409.5936, arXiv.org.
    3. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
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