Interval estimation for the Sharpe Ratio when returns are not i.i.d. with special emphasis on the GARCH(1,1) process with symmetric innovations

Lucio De Capitani ()

Statistical Methods & Applications, 2012, vol. 21, issue 4, 517-537

Abstract: In this paper, assuming that returns follows a stationary and ergodic stochastic process, the asymptotic distribution of the natural estimator of the Sharpe Ratio is explicitly given. This distribution is used in order to define an approximated confidence interval for the Sharpe ratio. Particular attention is devoted to the case of the GARCH(1,1) process. In this latter case, a simulation study is performed in order to evaluate the minimum sample size for reaching a good coverage accuracy of the asymptotic confidence intervals. Copyright Springer-Verlag 2012

Keywords: Financial performance measures; Stationary and ergodic process; Central limit theorem for dependent data; Newey–West estimator (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s10260-012-0198-z

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