Implications of Sharpe Ratio as a Performance Measure in Multi-Period Settings

Implications of the Sharpe Ratio as a Performance Measure in Multi-Period Settings

We study effects of using Sharpe ratio as a performance measure for compensating money managers in a dynamic and frictionless market setting. First, we demonstrate that with such a performance measure, the manager’s focus on the short horizon performance is detrimental to the investor’s long horizon performance. Numerical experiments illustrate that when returns are iid, the performance loss is...

critical period effects in foreign language learning:the influence of maturational state on the acquisition of reading,writing, and grammar in english as a foreign language

since the 1960s the age effects on learning both first and second language have been explored by many linguists and applied linguists (e.g lennerberg, 1967; schachter, 1996; long, 1990) and the existence of critical period for language acquisition was found to be a common ground of all these studies. in spite of some common findings, some issues about the impacts of age on acquiring a second or...

Sharpe Ratio Practice Note

The Sharpe Ratio Efficient Frontier

We evaluate the probability that an estimated Sharpe ratio exceeds a given threshold in presence of non-Normal returns. We show that this new uncertainty-adjusted investment skill metric (called Probabilistic Sharpe ratio, or PSR) has a number of important applications: First, it allows us to establish the track record length needed for rejecting the hypothesis that a measured Sharpe ratio is b...

How to double a Sharpe ratio

Alternative investments have proved their worth. Witness the estimated $1 trillion under management in alternative assets, or the recent decision by major pension funds such as Calpers or British Telecomto to allocate up to 5% of their portfolio to alternative assets. And yet, standard risk-adjusted performance indicators often prove unsuitable for hedge funds, which rely on highly specific tec...