Hot answers tagged performance
5
Here are couple references. Especially the first link to Andy Lo's paper contains a list of Sharpe ratios of popular mutual and hedge funds:
The Statistics of Sharpe Ratios
Dow Jones Credit Suisse Hedge Fund Index
Hedge Fund Performance and Generalized Sharpe Ratios
I would go with the first paper.
4
The answer your are looking for might be the story in "Benchmarking Measures of Investment Performance with Perfect-Foresight and Bankrupt Asset Allocation Strategies", by Grauer (Journal of Portfolio Management).
While this work main concerns are the differential ranking of various performance measures and with negative betas for market timing strategies, ...
3
Perhaps check out Poti and Levich (2009), or in a different setting but from one of the same authors, Poti and Wang (2010) "The coskewness puzzle" in JBF. They directly address the issue of what level of SR is plausible.
3
Pardon the lack of an actual link, and the formatting, but in footnote 6 of "Alpha is Volatility times IC times Score", Grinold, Richard C.,
Journal of Portfolio Management, Summer 1994 v20 n4 p9(8), Grinold suggests that "a truly outstanding manager" might have an information ratio of 1.33:
(6) A rough guideline for determining the required IC comes from ...
3
I would even stick to the original paper by Sharpe (1966):
Mutual Fund Performance. The Journal of Business Vol. 39, No. 1, Part 2 pp.119--138
If you look at the numbers on Page 6 you can see that the funds sharpe ratios roughly are between $0$ and $1$.
Since the Sharpe ratio already adjusts for the risk-free rate, you cannot really argue about its ...
1
Practically, the best metric is the one your boss wants you to use.
Alternately, you can think of the return of the desk like a leveraged security, as described here. This would suggest that the daily performance would be calculated as the profit divided by the basis. If you want to express the return in terms of the capital requirement, then that's one ...
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