A note on empirical Sharpe ratio dynamics

Generating a high positive excess return in a prospective period does not necessarily increase the empirical Sharpe ratio of an investment fund. Therefore, we derive a critical range in which prospective excess returns must lie in order to increase its empirical Sharpe ratio. We also give a formal statement of an excess return value within this critical range that leads to the maximum possible empirical Sharpe ratio in the prospective period.

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Year of publication:	2012
Authors:	Schuster, Martin ; Auer, Benjamin R.
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 116.2012, 1, p. 124-128
Publisher:	Elsevier
Subject:	Sharpe ratio \| Estimator \| Performance measurement \| Manipulation

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Type of publication:	Article
Classification:	G10 - General Financial Markets. General ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

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