Finding the Optimal Sharpe Ratio in Continuous-Time Markets with and Without A Risk-Free Assets in Amman Stock Exchange

Abstract

The aim of this study is to find the optimal Sharpe ratio in the markets with the continuation of time with and without risk-free assets on the Amman Stock Exchange during the period (2008-2017). The study uses the method of overlapping periods to achieve continuous-time. The study uses the Excel program to find the optimal Sharpe ratios for the share through the cut-off model. The study finds that there are is 7 sub-periods of 40, i.e. 18 %, above the cut-off point with risk-free in continuous timing model .Three of the periods are ranked as good periods to invest with 42.9%, and four of the periods are ranked as very good periods to invest with 57.1%. The period number 24 (24-4-2015 to 17-1-2016) is the best period to invest in services and industrial sectors with a return of 94%. On the other hand, the cut-off point without risk free case, there are 7 sub-periods of 40 above the cut-off point in continuous timing model. Two of these periods are ranked as good periods to invest with 28.6%, and five of these periods are ranked as very good periods to invest with 71.4%. Period number 35 (23-8-2016 to 16-5-2017) is the best period to invest in services and industrial sectors with a return of 99%.