A note on empirical Sharpe ratio dynamics
AbstractGenerating a high positive excess return in a prospective period does not necessarily increase the empirical Sharpe ratio of an investment fund. Therefore, we derive a critical range in which prospective excess returns must lie in order to increase its empirical Sharpe ratio. We also give a formal statement of an excess return value within this critical range that leads to the maximum possible empirical Sharpe ratio in the prospective period.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 116 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/ecolet
Sharpe ratio; Estimator; Performance measurement; Manipulation;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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