The sharpe-ratio tag has no wiki summary.
3
votes
1answer
73 views
Risk-free rate for ex-post evaluation of investment strategy
When evaluating the strategy ex-post using e.g. Sharpe ratio, what should one use as the risk-free rate? Let's suppose I am using a 1Y sample of weekly returns, sampled between 2012-01-01 and ...
2
votes
2answers
158 views
Calculating Geometric mean
I need to annualize daily returns for about 120 firms for over a period of 10 years. I chose to calculate the geometric return because 1) it is the actual return 2) to avoid the asymmetric effect of ...
1
vote
1answer
121 views
How to download risk free rate?
I've been trying to download the national interest rates for some countries. When i use Datastream, it only gives me the currency return (while i need yield).
Can someone please tell how to ...
1
vote
1answer
84 views
How to deal with different amount of td's in computing Sharpe Ratio
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 ...
10
votes
5answers
7k views
How to annualize Sharpe Ratio?
I have a basic question about annualized Sharpe Ratio Calculation: if I know the daily return of my portfolio, the thing I need to do is multiply the Sharpe Ratio by $\sqrt{252}$ to have it ...
7
votes
2answers
542 views
Kelly criterion and Sharpe ratio
Whats the relationship between the Kelly criterion and the Sharpe ratio?
$$
f=\frac{p(b+1)-1}{b}
$$
where $f$ is a percentage of how much capital to place on a bet, $p$ is the probability of ...
3
votes
2answers
322 views
Computing the Sharpe Ratio
The building blocks of the Sharpe ratio—expected returns and volatilities—are unknown quantities that must be estimated statistically and are subject to estimation error.
The main problem I have is ...
0
votes
2answers
147 views
Sharpe ratio in days with no open positions
Should I include or not the days a strategy has no open positions (thus no returns) in the Sharpe ratio calculation?
9
votes
6answers
2k views
How high of a Sharpe ratio is implausibly high for a low-frequency equity strategy?
I am looking to convince someone that an annualized Sharpe Ratio of 7 is 'extremely high' for a low frequency (daily rebalancing, say) long-short technical strategy on U.S. equities. I was hoping for ...
1
vote
1answer
207 views
Performance Stats of Pairs Trades
This is something I've been thinking about for a while but I can't reach a clear conclusion. When we calculate, for example, the profit factor for a pairs trading strategy, do we treat each pairs ...
3
votes
2answers
636 views
How to define the objective function for a custom optimization problem?
I would like to find the allocations that would minimize some user-defined metric (Sortino, minimum drawdown, etc) for a portfolio of assets.
How would one go about formulating the objective ...
7
votes
4answers
409 views
Is this a common variation of sharpe ratio?
As an aside on his answer on another question Freddy said:
Sharpe ratio is an often cited metric, though I do not like it too
much because you are penalized for out-sized positive returns while ...
9
votes
1answer
311 views
How does one measure the effect of latency on potential returns?
I am looking to evaluate the hypothetical advantage one trading system has over another in terms of the possible returns given their latency.
Irene Aldridge wrote a piece (How Profitable Are ...
4
votes
2answers
462 views
How should I compute the Sharpe Ratio for mid-frequency pair trading strategy?
I have a pair trading strategy with positions that last 3-5 days and trades 2-3 times a month. By design, all the trades are profitable until the cointegration is broken.
Should I calculate the ...
3
votes
2answers
264 views
How is someone's Sharpe ratio recorded and communicated?
When I read about, say, some hedge fund wanting people with such-and-such Sharpe ratio, how is that ratio recorded and communicated to the interested party? I mean, do people just take it on faith ...
7
votes
0answers
287 views
Can we use White's reality check to compare two Sharpe ratios?
I read a paper from Ledoit and Wolf that proposes a method to compare two Sharpe ratios and a paper from White that proposes a method to compare $n$ trading rules.
My question is: Can we use White's ...
8
votes
1answer
821 views
What is the average Sharpe ratio of volatility arbitrage funds?
Where can I get data on performance metrics for volatility arbitrage funds? I am trying to compare the Sharpe ratio of my strategy to those of the major players.
17
votes
2answers
555 views
How do you correct Max Draw-Down for auto-correlation?
When returns are auto-correlated, calculating a Sharpe ratio := $\frac {mean(x)}{\sqrt{var(x)}}$, (where $x$ are the returns) is complicated, but basically solved (see, e.g. Lo (2005)). Without the ...
9
votes
4answers
2k views
Should Sharpe ratio be computed using log returns or relative returns?
I am trying to reconcile some research with some published values of 'Sharpe ratio', and would like to know the 'standard' method for computing the same:
Based on daily returns? Monthly? Weekly?
...
