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 a published source (preferably a journal article or conference paper) that either
- Provides a scale for interpreting Sharpe (e.g. "> 1 is good, > 2 is excellent, ... "), based on observed Sharpe ratios of, say, active managers, or some such. (I can imagine this being rejected as "biased" or "underinformed")
- Preferrably, presents statistics on achieved Sharpe ratios of Hedge Funds and other active managers, perhaps by strategy class, with long-ish histories, even with some back-fill bias, that would allow one to estimate what quantile a given Sharpe ratio would fall at. (e.g. "the cutoff for top 1% of Convertible Arb. funds achieved Sharpe is 1.5" (I am making that up.))
edit: I reiterate that I have no doubts the number is bogus, but am trying to convince someone else, someone without much market experience, that this is way outside of normal.