Hansen–Jagannathan bound

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Hansen–Jagannathan bound is a theorem in financial economics that says that the ratio of the standard deviation of a stochastic discount factor to its mean exceeds the Sharpe Ratio attained by any portfolio. This result is an application of the Cauchy–Schwarz inequality.

References

Hansen, Lars Peter; Jagannathan, Ravi (1991). "Implications of Security Market Data for Models of Dynamic Economies". Journal of Political Economy 99 (2): 225. doi:10.1086/261749.
Otrok, C., Ravikumar, B., Whiteman C.H. (2002). "Evaluating Asset-Pricing Models Using The Hansen-Jagannathan Bound: A Monte Carlo Investigation". Journal of Applied Econometrics 17 (2): 149–174. doi:10.1002/jae.640.

External links

Hansen and Jagannathan bounds

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