[R-SIG-Finance] ks test to compare manager alphas.

[Patrick Burns]

I think there are some practical problems.

The ks.test will test if funds are different.
It doesn't really test if one fund is better
than the other.

For the data that you are likely to have, I
doubt you have much power.  I would try
simulating with some known distributions to
see how much power there is.

On 20/12/2010 21:04, Chiquoine, Ben wrote:
> Hi,
>
> I've recently discovered ks.test() in the stats package.  I'd like to apply it to alphas generated by hedge fund managers. I have several years of monthly excess returns for each manager and I'd like to see which come from distributions that are not statistically different.  I have two questions for the group.  The first question is whether the KS test is valid for two returns series which are likely not iid?  I think I read that as long as the difference in empirical distributions functions (ecdf) is iid from the true distribution (which I don't know) the test is valid.  My second question is more focused on R.  ks.test gives me the source code for the R function but there are several calls to C code within the function.  I'm wondering if there is any way to view the source for the C functions?  I've searched R help for an answer to this less finance related question but only found one post in which they said the source could be found in a file called ks.c.  Unfortunately
 I!
>    can't find this file on my hard drive or on the web.  Any help this group can offer is greatly appreciated.
>
> Thanks,
>
> Ben
>
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-- 
Patrick Burns
patrick at burns-stat.com
http://www.burns-stat.com
http://www.portfolioprobe.com/blog
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