4.5.3. Mean–Variance Ratio

It is well-known that the Sharpe ratio test is not uniformly most powerful unbiased (UMPU). To ge<sup>t</sup> a UMPU test, Bai et al. (2011d) established the mean–variance-ratio (MVR) statistic to test the equality of mean–variance ratios for different assets. Bai et al. (2012) further improved the test by removing the background risk. They showed that their proposed MVR statistic is UMPU in any sample, no matter whether the sample is big or small.
