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Risks 2018, 6(2), 40; https://doi.org/10.3390/risks6020040

An Intersection–Union Test for the Sharpe Ratio

Chair of Applied Stochastics and Risk Management, Department of Mathematics and Statistics, Helmut Schmidt University, Holstenhofweg 85, D-22043 Hamburg, Germany
Received: 26 February 2018 / Revised: 12 April 2018 / Accepted: 13 April 2018 / Published: 19 April 2018
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Abstract

An intersection–union test for supporting the hypothesis that a given investment strategy is optimal among a set of alternatives is presented. It compares the Sharpe ratio of the benchmark with that of each other strategy. The intersection–union test takes serial dependence into account and does not presume that asset returns are multivariate normally distributed. An empirical study based on the G–7 countries demonstrates that it is hard to find significant results due to the lack of data, which confirms a general observation in empirical finance. View Full-Text
Keywords: ergodicity; Gordin’s condition; heteroscedasticity; intersection–union test; Jobson–Korkie test; performance measurement; Sharpe ratio ergodicity; Gordin’s condition; heteroscedasticity; intersection–union test; Jobson–Korkie test; performance measurement; Sharpe ratio
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Frahm, G. An Intersection–Union Test for the Sharpe Ratio. Risks 2018, 6, 40.

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