Sharpe Portfolio Using a Cross-Efficiency Evaluation

Mercedes Landete (), Juan F. Monge (), José L. Ruiz () and José V. Segura ()
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Mercedes Landete: University Miguel Hernandez
Juan F. Monge: University Miguel Hernandez
José L. Ruiz: University Miguel Hernandez
José V. Segura: University Miguel Hernandez

Chapter Chapter 15 in Data Science and Productivity Analytics, 2020, pp 415-439 from Springer

Abstract: Abstract The Sharpe ratio is a way to compare the excess returns (over the risk-free asset) of portfolios for each unit of volatility that is generated by a portfolio. In this paper, we introduce a robust Sharpe ratio portfolio under the assumption that the risk-free asset is unknown. We propose a robust portfolio that maximizes the Sharpe ratio when the risk-free asset is unknown, but is within a given interval. To compute the best Sharpe ratio portfolio, all the Sharpe ratios for any risk-free asset are considered and compared by using the so-called cross-efficiency evaluation. An explicit expression of the Cross-Efficiency Sharpe Ratio portfolio is presented when short selling is allowed.

Keywords: Finance; Portfolio; Minimum-variance portfolio; Cross-efficiency (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-3-030-43384-0_15

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DOI: 10.1007/978-3-030-43384-0_15

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