Say I am looking at a performance report for a hedge fund manager who trades mostly equities, and they provide me a list of monthly returns for the past 5 years. What is the industry standard way to compute Sharpe ratio, alpha, and beta?
- Calculated off monthly returns and annualized by multiplying by $\sqrt 12$?
- Or calculated off daily log returns and annualized by multiplying by $\sqrt 252$?
Alpha & Beta:
- Calculated by performing a regression on monthly returns relative to S&P 500 I assume.
- Is alpha annualized by multiplying by 12?
- Beta does not need to be annualized, is that correct?
I am reading about a myriad of ways to compute these metrics and am wondering what most managers do.