Artikel
How to compare market efficiency? The Sharpe ratio based on the ARMA-GARCH forecast
This paper derives a new method for comparing the weak-form efficiency of markets. The author derives the formula of the Sharpe ratio from the ARMA-GARCH model and finds that the Sharpe ratio just depends on the coefficients of the AR and MA terms and is not affected by the GARCH process. For empirical purposes, the Sharpe ratio can be formulated with a monotonic increasing function of R-squared if the sample size is large enough. One can utilize the Sharpe ratio to compare weak-form efficiency among different markets. The results of stochastic simulation demonstrate the validity of the proposed method. The author also constructs empirical AR-GARCH models and computes the Sharpe ratio for S&P 500 Index and the SSE Composite Index.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Financial Innovation ; ISSN: 2199-4730 ; Volume: 6 ; Year: 2020 ; Issue: 1 ; Pages: 1-21 ; Heidelberg: Springer
- Klassifikation
-
Management
General Financial Markets: General (includes Measurement and Data)
Information and Market Efficiency; Event Studies; Insider Trading
Financial Forecasting and Simulation
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- Thema
-
ARMA
GARCH
Measurement of market efficiency
Sharpe ratio
Stochastic simulation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Liu, Lin
Chen, Qiguang
- Ereignis
-
Veröffentlichung
- (wer)
-
Springer
- (wo)
-
Heidelberg
- (wann)
-
2020
- DOI
-
doi:10.1186/s40854-020-00200-6
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- Liu, Lin
- Chen, Qiguang
- Springer
Entstanden
- 2020
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