Sharpe portfolio using a cross-efficiency evaluation

Juan F. Monge, Mercedes Landete and Jos\'e L. Ruiz

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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-Eficiency Sharpe ratio portfolio is presented when short selling is allowed.

Date: 2016-10, Revised 2016-10
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Published in Data Science and Productivity Analytics. International Series in Operations Research & Management Science, 2020

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1610.00937

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