The use of the bootstrap method for the assessment of investment effectiveness and risk – the case of confidence intervals estimation for the Sharpe ratio and TailVaR

Klaudia Jarno () and £ukasz Smaga ()
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Klaudia Jarno: Poznañ University of Economics and Business, al. Niepodleg³oœci 10, 61-875 Poznañ, Poland
£ukasz Smaga: Adam Mickiewicz University, Faculty of Mathematics and Computer Science, ul. Uniwersytetu Poznañskiego 4, 61-614 Poznañ, Poland

Journal of Banking and Financial Economics, 2020, vol. 1, issue 13, 40-50

Abstract: This paper is aimed at presenting application of bootstrap interval estimation methods to the assessment of financial investment’s effectiveness and risk. At first, we give an overview of various methods of bootstrap confidence interval estimation, i.e. bootstrap-t interval, percentile interval and BCa interval. Then, bootstrap confidence interval estimation methods are used to estimate confidence intervals for the Sharpe ratio and TailVaR of the Warsaw Stock Exchange sectoral indices. The results show that the bootstrap confidence intervals of different types are quite similarly positioned for each of the analysed index and measure. Taking into the account the locations of confidence intervals for both the Sharpe ratio and TailVaR, the real estate sector tends to be the most advantageous from the investor’s viewpoint.

Keywords: Bootstrap; confidence intervals; Sharpe ratio; TailVaR; stock market index (search for similar items in EconPapers)
JEL-codes: C13 C15 G11 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:sgm:jbfeuw:v:1:y:2020:i:13:p:40-50

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