bootTimeInference (version 0.1.0)
Robust Performance Hypothesis Testing with the Sharpe Ratio
Description
Applied researchers often test for the difference of the Sharpe
ratios of two investment strategies. A very popular tool to this end is the test
of Jobson and Korkie, which has been corrected by Memmel. Unfortunately, this
test is not valid when returns have tails heavier than the normal distribution
or are of time series nature. Instead, we propose the use of robust inference
methods. In particular, we suggest to construct a studentized time series
bootstrap confidence interval for the difference of the Sharpe ratios and
to declare the two ratios different if zero is not contained in the obtained
interval. This approach has the advantage that one can simply resample from the
observed data as opposed to some null-restricted data.