Time-Varying Sharpe Ratios and Market Timing

The Statistics of Sharpe Ratios

The building blocks of the Sharpe ratio—expected returns and volatilities— are unknown quantities that must be estimated statistically and are, therefore, subject to estimation error. This raises the natural question: How accurately are Sharpe ratios measured? To address this question, I derive explicit expressions for the statistical distribution of the Sharpe ratio using standard asymptotic t...

A Note on Trader Sharpe Ratios

Traders in the financial world are assessed by the amount of money they make and, increasingly, by the amount of money they make per unit of risk taken, a measure known as the Sharpe Ratio. Little is known about the average Sharpe Ratio among traders, but the Efficient Market Hypothesis suggests that traders, like asset managers, should not outperform the broad market. Here we report the findin...

TIME - VARYING WORLD MARKET INTEGRATION Geert Bekaert

We propose a conditional measure of capital market integration that allows us to characterize both the cross-section and time-series ofexpected returns in developed and emerging markets. Our measure, which arises from a conditional regime-switching model, allows us to describe expected returns in countries that are segmented from world capital markets in one part of the sample and become integr...

SE-Systems, Timing Mechanisms, and Time-Varying Codes

Heterogenous Agents, Time-varying Macro Fundamental and Asset Market Dynamics

This paper proposes a new channel to explain the positive price-volume correlation in the housing market. I study a simple overlapping generations model in the presence of heterogeneous agents. In the model, (i) consumer investors are forward looking and heterogeneous both in their holding periods and in their ownership preference, (ii) the underlying time varying macro fundamental is persisten...