The Sharpe ratio of estimated efficient portfolios

Kourtis, Apostolos (2016) The Sharpe ratio of estimated efficient portfolios. Finance Research Letters, 17. pp. 72-78. ISSN 1544-6123

[img]
Preview
PDF (Kourtis Sharpe Ratio FRL) - Submitted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (424kB) | Preview

Abstract

Investors often adopt mean-variance efficient portfolios for achieving superior risk-adjusted returns. However, such portfolios are sensitive to estimation errors, which affect portfolio performance. To understand the impact of estimation errors, I develop simple and intuitive formulas of the squared Sharpe ratio that investors should expect from estimated efficient portfolios. The new formulas show that the expected squared Sharpe ratio is a function of the length of the available data, the number of assets and the maximum attainable Sharpe ratio. My results enable the portfolio manager to assess the value of efficient portfolios as investment vehicles, given the investment environment.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: Pure Connector
Date Deposited: 22 Mar 2016 09:24
Last Modified: 29 May 2020 23:48
URI: https://ueaeprints.uea.ac.uk/id/eprint/57749
DOI: 10.1016/j.frl.2016.01.009

Actions (login required)

View Item View Item