Testing the equality of modified Sharpe ratios
David Ardia & Kris Boudt
| Abstract |
The modified Sharpe ratio is commonly used to evaluate the
risk-adjusted performance of an investment with non-normal returns,
such as hedge funds. In this note, a test for equality of modified
Sharpe ratios of two investments is developed. A simulation study
demonstrates the good size and power properties of the test. An
application illustrates the complementarity between the Sharpe
ratio and modified Sharpe ratio test for performance testing on
hedge fund return data. |
| Keywords |
Bootstrap test; Hedge fund; Modified Sharpe ratio; Non-normal returns; Performance measurement |
| Citation | Ardia, D., & Boudt, K. (2015). Testing the equality of modified Sharpe ratios. Finance Research Letters, 13, 97-104. |
| Type | Journal article (English) |
| Date of appearance | 2015 |
| Journal | Finance Research Letters |
| Volume | 13 |
| Pages | 97-104 |
| URL | http://www.sciencedirect.com/science/article/pii/S1544612... |
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