The mean-variance ratio test-A complement to the coefficient of variation test and the Sharpe ratio test

Zhidong Bai; Keyan Wang; Wing Keung WONG

doi:10.1016/j.spl.2011.02.035

The mean-variance ratio test-A complement to the coefficient of variation test and the Sharpe ratio test

Zhidong Bai, Keyan Wang, Wing Keung WONG^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

31 Citations (Scopus)

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Abstract

To circumvent the limitations of the tests for coefficients of variation and Sharpe ratios, we develop the mean-variance ratio statistic for testing the equality of mean-variance ratios, and prove that our proposed statistic is the uniformly most powerful unbiased statistic. In addition, we illustrate the applicability of our proposed test for comparing the performances of stock indices.

Original language	English
Pages (from-to)	1078-1085
Number of pages	8
Journal	Statistics and Probability Letters
Volume	81
Issue number	8
DOIs	https://doi.org/10.1016/j.spl.2011.02.035
Publication status	Published - Aug 2011

Scopus Subject Areas

Statistics and Probability
Statistics, Probability and Uncertainty

User-Defined Keywords

Coefficient of variation
Hypothesis testing
Mean-variance ratio
Sharpe ratio
Uniformly most powerful unbiased test

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10.1016/j.spl.2011.02.035

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abstract = "To circumvent the limitations of the tests for coefficients of variation and Sharpe ratios, we develop the mean-variance ratio statistic for testing the equality of mean-variance ratios, and prove that our proposed statistic is the uniformly most powerful unbiased statistic. In addition, we illustrate the applicability of our proposed test for comparing the performances of stock indices.",

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AB - To circumvent the limitations of the tests for coefficients of variation and Sharpe ratios, we develop the mean-variance ratio statistic for testing the equality of mean-variance ratios, and prove that our proposed statistic is the uniformly most powerful unbiased statistic. In addition, we illustrate the applicability of our proposed test for comparing the performances of stock indices.

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The mean-variance ratio test-A complement to the coefficient of variation test and the Sharpe ratio test

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