A mixed Sharpe ratio

Wing Keung WONG*, J. A. Wright, S. C.P. Yam, S. P. Yung

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    20 Citations (Scopus)


    Recent results in optimal stopping theory have shown that a 'bang-bang' (buy or sell immediately) style of trading strategy is in some sense optimal provided the asset's price dynamics follow certain familiar stochastic processes. This paper constructs a reward-to-variability ratio (the mixed Sharpe ratio) that is sufficient for this strategy's implementation. The use of this ratio for optimal portfolio selection is discussed and evidence for it varying over time is found. The performances of the 'bang-bang' and 'buy-and-hold' trading strategies are compared and the former is found to be significantly more profitable.

    Original languageEnglish
    Pages (from-to)37-65
    Number of pages29
    JournalRisk and Decision Analysis
    Issue number1-2
    Publication statusPublished - 2012

    Scopus Subject Areas

    • Statistics and Probability
    • Finance
    • Economics and Econometrics
    • Statistics, Probability and Uncertainty

    User-Defined Keywords

    • Lévy processes
    • mutual funds
    • optimal stopping theory
    • optimal trading strategy
    • Sharpe ratio


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