Hansen–Jagannathan bound

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 applies, among others, the Cauchy–Schwarz inequality.

References

Hansen, Lars Peter; Jagannathan, Ravi (1991). "Implications of Security Market Data for Models of Dynamic Economies" (PDF). Journal of Political Economy. 99 (2): 225–262. 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. CiteSeerX 10.1.1.15.6332. doi:10.1002/jae.640.CS1 maint: multiple names: authors list (link)

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