Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
6895301 | European Journal of Operational Research | 2018 | 9 Pages |
Abstract
Most existing results on the distribution of the maximum Sharpe ratio depend on the assumption of multivariate normal return distributions. We use recent results from the literature to provide an analytical representation of the distribution of the difference between two maximum Sharpe ratios for much less restrictive distributional assumptions, both with and without short sales. Knowing the distribution of the difference enables us to test ex ante whether or not the inclusion of additional variables leads to a significant improvement in the maximum Sharpe ratio. In addition, we characterize the optimal long-only solution and provide conditions for global optimality.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Michael Hanke, Spiridon Penev,