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A note on the evaluation of long-run investment decisions using the sharpe ratio |
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| Authors: | Ken Johnston John Hatem Elton Scott |
| Affiliation: | 1. Campbell School of Business, Department of Accounting and Finance, Berry College, 2277 Martha Berry Hwy NW, Mt Berry, GA, 30149, USA 2. College of Business, Department of Finance and Quantitative Analysis, Georgia Southern University, Statesboro, GA, 30460, USA 3. Flagler College—Tallahassee, 444 Appleyard Drive, Tallahassee, FL, 32304, USA |
| Abstract: | This paper reexamines the use of the Sharpe ratio to measure the performance of large and small company stocks along with corporate bonds over different holding periods. It builds on previous research which cites the effects of serial correlation and non-normality in the creation of estimation error in the calculation of the Sharpe ratio. It finds that higher order moments such as skewness and kurtosis are a further source of error that must be accounted for when making inferences about asset performance. |
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