In calculating the Sharpe Ratio, should I take into account the days were I have 0 return due to non-trading day? Another user posted a similar question but this was related to trading days with no open position. This is actually the same issues but then related to return history and inactive trading days. When analyzing the return history of several firms in the Asia Pacific region I noticed that there are some irregularities when it comes to trading days.
For example, X has 239 td’s on the TSE while Y has 250 td’s on the SGX. Squaring both daily returns by 252 would give biased returns/Sharpe ratios. My gut feeling says to square it by the amount of actual td’s rather than using the common 252 days. It also sometimes occurs within, for example the Japanese market, that different listed firms produce 0 return four times in a row, while others have on those same days a positive/negative return. The data is downloaded from the DataStream database.
Thanks in advance.