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 (1981), which has been corrected by Memmel (2003). Unfortunately, this test is not valid when returns have tails heavier than the...

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 [Jobson, J.D. and Korkie, B.M. (1981). Performance hypothesis testing with the Sharpe and Treynor measures. Journal of Finance,...