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What is Sharpe Ratio and Student t-Distribution Insights about?

This paper explores the statistical distribution of the Sharpe ratio, highlighting its dependence on estimated expected returns and volatilities, which can introduce estimation errors. It establishes that the Sharpe ratio for independent normally distributed returns follows a non-centered Student distribution, extending previous asymptotic results and examining the impact of autocorrelation and compounding on the ratio. The findings provide insights into the empirical efficiency of the Sharpe ratio and its

Author

Eric Benhamou

Language

EN