A Double Sharpe Ratio

10 Pages Posted: 16 Aug 1999  

Hrishikesh D. Vinod

Fordham University - Department of Economics

Matthew R. Morey

Pace University - Lubin School of Business - Department of Finance and Economics

Date Written: June 1, 1999

Abstract

Sharpe's (1966) portfolio performance ratio, the ratio of the portfolio?s expected return to its standard deviation, is a very well known tool for comparing portfolios. However, due to the presence of random denominators in the definition of the ratio, the sampling distribution of the Sharpe ratio is somewhat difficult to determine. This paper studies the properties of Sharpe ratio and then uses the bootstrap methodology to suggest a new "double" Sharpe ratio which incorporates estimation risk. We illustrate our methodology with the 30 largest growth mutual funds. We find that the ranking of mutual funds by the Sharpe and Double Sharpe ratios can be quite different.

JEL Classification: G11

Suggested Citation

Vinod, Hrishikesh D. and Morey, Matthew R., A Double Sharpe Ratio (June 1, 1999). Available at SSRN: https://ssrn.com/abstract=168748 or http://dx.doi.org/10.2139/ssrn.168748

Hrishikesh D. Vinod (Contact Author)

Fordham University - Department of Economics ( email )

Dealy Hall
Bronx, NY 10458
United States
718-817-4065 (Phone)
718-817-3518 (Fax)

Matthew R. Morey

Pace University - Lubin School of Business - Department of Finance and Economics ( email )

One Pace Plaza
New York, NY 10038-1502
United States
212-618-6471 (Phone)

HOME PAGE: http://webpage.pace.edu/mmorey/

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