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I can only repeat myself because your mentioned previously asked question is essentially identical: => I would say do not include non-trading days, do not include days with zero position, do not include days where the asset did not trade for whatever other reason. Here some reasons and pointers: Sharpe measures excess returns scaled by volatility. The ...

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There are sufficiently different ways to calculate the Sharpe ratio that the best advice I can give is to do whatever your boss wants. Also, if it is for a paper or research document, just make clear you document your method. My approach is usually to calculate the highest frequency Sharpe ratio I can based on the data. The higher frequency choice is to get ...

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In your question you do not provide any reference. I believe that we are in front of two possibilities: annualized linear returns and Compound Annual Growth Rate (CAGR). If compounding is not mentioned, I would assume annualized linear returns. $n$-years Annualized linear returns $n$ = number of years $n * r_A = r_*$, where $r_*$ is the return over the ...

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Here is an example calculation according to the formula by William F. Sharpe, 1994. The OP's method of annualising the variance (as used below), is also specified by the Committee of European Securities Regulators in this document, page 5, box 1. For this example, taking 24 months of returns of risk-free proxy (US 4-week T-bills) and an example stock, (and ...

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I'm currently also using daily returns which I want to annualize. This is my approach: For every month, I calculate the simple return using the formula: (end-of-month closing price / beginning-of-month closing price) - 1. I use the Excel formula somproduct(geomean(A1:A12+1)-1) to find the monthly compounded return. Finally, I annualize the result of step 2 ...

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If you assume that your monthly returns are independent from each other, then the annualized variance of each series, and the covariance can be annualized. This assumption allows you to use V(x1+X2+...+x12) = V(x1) + V(x2) + ... + V(x12) where xi is the return for the month "i". Actually, for this to happen you only need a weaker assumption: that is that ...

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