An Improvement of the Sharpe-Ratio Test on Small Samples -- Mean-Variance Ratio Test

13 Pages Posted: 4 Feb 2009 Last revised: 7 Feb 2009

Zhidong Bai

Northeast Normal University

Keyan Wong

National University of Singapore (NUS)

Wing-Keung Wong

Asia University, Department of Finance

Date Written: January 30, 2009

Abstract

To circumvent the limitations of the Sharpe-ratio statistic on testing small samples, we develop the mean-variance-ratio (MVR) statistic to test the performance among assets for small samples. We provide theoretical reasoning to use MVR and prove that our proposed statistic is uniformly most powerful unbiased.

Keywords: Sharpe ratio, mean-variance ratio, test statistics, hypothesis testing, uniformly most powerful unbiased test

JEL Classification: C12, G11

Suggested Citation

Bai, Zhidong and Wong, Keyan and Wong, Wing-Keung, An Improvement of the Sharpe-Ratio Test on Small Samples -- Mean-Variance Ratio Test (January 30, 2009). Available at SSRN: https://ssrn.com/abstract=1336898 or http://dx.doi.org/10.2139/ssrn.1336898

Zhidong Bai

Northeast Normal University ( email )

Changchun
China

Keyan Wong

National University of Singapore (NUS)

Bukit Timah Road 469 G
Singapore, 117591
Singapore

Wing-Keung Wong (Contact Author)

Asia University, Department of Finance ( email )

Taiwan
Taiwan

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