The bank financial management process involves assets, liabilities, and factors external to the bank and thus is multivariate. Because variables such as deposits, loans, or interest rates are often related with a time lag to another variable such as investments, the process is also dynamic. Although the research work of Aigner [1], Aigner and Bryan [2], Anderson and Burger [3], Bryan [6], Bryan and Carleton [7], Fraser and Rose [10], Hester and Pierce [13], and Melnik [14] has dealt with the multivariate aspect of the process, the consideration of dynamic properties in empirical work has been limited.

Shantaram P. Hegde, Robert E. Miller, Market-Making in Initial Public Offerings of Common Stocks: An Empirical Analysis, The Journal of Financial and Quantitative Analysis, Vol. 24, No. 1 (Mar., 1989), pp. 75-90

Several years ago Sharpe suggested a measure for the evaluation of portfolio performance. The measure was conceptually simple, easily calculated, and applicable to an entire investment portfolio, in contrast to the measures of Treynor and Jensen which measure only the undiversifiable risk in a portfolio. Sharpe's measure is still a frequently recommended tool for measuring portfolio performance. The measure is, however, biased. It is the purpose of this note to demonstrate the existence of the bias, indicate its size, and provide a means of correcting it.