IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Tests of the correlation between portfolio performance measures

Listed author(s):
Registered author(s):

    This paper reports an investigation into measures of portfolio performance. The Sharpe ratio is the natural performance measure when asset returns come from any elliptically symmetric distribution, regardless of the investor utility function and subject only to regularity conditions. Under such distributions, the measures of portfolio performance which are in common use are monotonic functions of the Sharpe ratio. It is shown that for large sample sizes the correlation between measures of performance which are functions of the Sharpe ratio is asymptotically equal to unity. The correct specification for tests of the correlation between portfolio performance measures is therefore the null hypothesis ρ = 1. A multivariate test of the correlations between several measures of performance is presented. This may be used in either a multivariate or bivariate setting. The paper presents a detailed example based on a number of FTSE indices. Performance measures are computed both parametrically using the normal distribution and using sample estimates. The new test does not lead to the rejection of the null hypothesis that all correlations are equal to unity. This suggests that despite the evidence of non-normality in returns there seems to be little gained in abandoning the Sharpe ratio.

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Article provided by Capco Institute in its journal Journal of Financial Transformation.

    Volume (Year): 35 (2012)
    Issue (Month): ()
    Pages: 123-132

    in new window

    Handle: RePEc:ris:jofitr:1533
    Contact details of provider: Postal:
    77 Water Street, 10th Floor, New York NY 10005

    Phone: +1 212 284 8600
    Web page:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:1533. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Shahin Shojai)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.