Making Sense of the Sharpe Ratio
Two Sigma’s Labs team recently performed an in-depth survey of the extensive literature on the Sharpe ratio and published its findings in a new Technical Report.
Insights: finance
Sharpe Ratio: Estimation, Confidence Intervals, and Hypothesis Testing
The authors survey and discuss methods proposed in the literature for estimating the Sharpe ratio; computing confidence intervals around a point estimation of the Sharpe ratio; and performing hypothesis testing on a single Sharpe ratio and on the difference between two Sharpe ratios.