Skip navigation
Skip navigation

Bias and consistency of the maximum Sharpe ratio

Maller, Ross A; Durand, Robert B; Lee, P. T


We show that the maximum Sharpe ratio obtained via the Markowitz optimization procedure from a sample of returns on a number of risky assets is, under commonly satisfied assumptions, biased upwards for the population value. Thus investment advice, decisions and assessments based on the estimated Sharpe ratio will be overly optimistic. The bias in the estimator is shown theoretically and illustrated using a data set of Spiders and iShares. We obtain bounds on the difference between the sample...[Show more]

CollectionsANU Research Publications
Date published: 2005
Type: Working/Technical Paper
Source: The Journal of Risk


File Description SizeFormat Image
F9908.pdf168.8 kBAdobe PDFThumbnail

Items in Open Research are protected by copyright, with all rights reserved, unless otherwise indicated.

Updated:  20 July 2017/ Responsible Officer:  University Librarian/ Page Contact:  Library Systems & Web Coordinator