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Testing equality of modified Sharpe ratios

David Ardia and Kris Boudt

Finance Research Letters, 2015, vol. 13, issue C, 97-104

Abstract: The modified Sharpe ratio is commonly used to evaluate the risk-adjusted performance of an investment with non-normal returns, such as hedge funds. In this note, a test for equality of modified Sharpe ratios of two investments is developed. A simulation study demonstrates the good size and power properties of the test. An application illustrates the complementarity between the Sharpe ratio and modified Sharpe ratio test for performance testing on hedge fund return data.

Keywords: Bootstrap test; Hedge fund; Modified Sharpe ratio; Non-normal returns; Performance measurement (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 C52 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:13:y:2015:i:c:p:97-104

DOI: 10.1016/j.frl.2015.02.008

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