A financial Rayleigh criterion: How long must we wait to detect outperformance?

Alex Adamou

LML Resident Fellow

In physics, the Rayleigh criterion answers the question: how close must we get before we can resolve two objects optically? A similar question can be posed in finance: how long must we wait before we can resolve – in this case, statistically – the performance of a fund from its benchmark. We will explore this question using a simple mathematical model. The answers will shed light on whether we can detect “skill” from luck, and whether fund management fees can be empirically justified.


UNISON Centre, 130 Euston Road, London.

Date & Time

22nd June 2016