An Upper Bound for Ex-Post Sharpe Ratio with Application in Performance Measurement
Publication in refereed journal


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AbstractThe Sharpe ratio and the maximum drawdown (MDD) are two of the most important tools for risk measurement. Existing literature has presented analytical results relating them under geometric Brownian motion. In this paper, we take a data-driven approach to derive a relationship between ex-post Sharpe ratio and MDD. We do not assume any specific distribution of the returns except that they be stationary and ergodic. The relationship we derive can serve as a quick sanity check for black-box performance reports if the Sharpe ratios are estimated by the ex-post Sharpe ratio. Some numerical results are given for illustration.
All Author(s) ListRaymond H. Chan, Kelvin K. Kan, Alfred K. Ma
Journal nameJournal of Performance Measurement
Year2017
Volume Number22
Issue Number1
PublisherThe Spaulding Group
Pages7 - 19
ISSN1522-8746
LanguagesEnglish-United Kingdom

Last updated on 2018-13-07 at 15:36