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Hard · statistical_analysis · Quant Researcher interview question · probabilistic_sharpe_ratio, sharpe_ratio, higher_moments, skewness, kurtosis, statistical_analysis
The Probabilistic Sharpe Ratio (PSR) computes the probability that a strategy's true Sharpe ratio exceeds a benchmark, correcting for estimation errors caused by non-normal return distributions. Its variance estimate incorporates sample skewness and kurtosis, providing a more robust statistical confidence level than the classical Sharpe ratio. This is crucial for accurately comparing investment strategies or fund managers with different return profiles. Task Implement the function probabilistic