sharpe-ratio-non-iid-corrections
Sharpe Ratio Non-IID Corrections
Sharpe ratio inference for a single strategy whose returns are non-Normal and serially correlated. Reference implementation of the generalized sampling variance in López de Prado, Lipton & Zoonekynd (2026), and of the single-test statistics that use it.
Self-Evolving Skill: This skill improves through use. If instructions are wrong, parameters drifted, or a workaround was needed — fix this file immediately, don't defer. Only update for real, reproducible issues.
Out of scope — do not re-add (operator rule, 2026-10-15)
Never compute, report, rank by or cite the Deflated Sharpe Ratio or any other trial-count correction: FWER and FDR procedures (Holm, Bonferroni/Šidák, Benjamini-Yekutieli, the paper's pFDR/oFDR/SFDR), e-LOND and other online multiple testing, expected-maximum-Sharpe deflation, effective-number-of-trials estimates, and the minimum backtest length (MinBTL), which is a function of the number of trials. MinTRL is a different quantity (one rule's own track record) and stays. They were removed from this skill on purpose. Instead:
- Judge parsimony on the model itself (how many free parameters, how much was tuned), not by deflating a Sharpe for the number of trials.
- Guard selection with registration before runs and with unused data: fix the hypothesis, rule and evaluation window before running, and confirm on data no run has touched.
- Report each rule's own statistics: its Sharpe, ρ-corrected σ[SR̂], PSR, MinTRL and power.
PSR, MinTRL, the ρ-corrected variance and power are single-test statistics and stay. PBO/CSCV describes a selection procedure and is not covered by the rule.