A note on empirical Sharpe ratio dynamics

Martin Schuster and Benjamin R. Auer

Economics Letters, 2012, vol. 116, issue 1, 124-128

Abstract: Generating 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.

Keywords: Sharpe ratio; Estimator; Performance measurement; Manipulation (search for similar items in EconPapers)
JEL-codes: G10 G11 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:116:y:2012:i:1:p:124-128

DOI: 10.1016/j.econlet.2012.02.005

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