When computing the Sharpe for a strategy, should the shut down period be considered?
It usually depends on:
- the reason why the strategy was shut down
- what are you using the sharpe ratio number for
you're a discretionary trader and at a certain point decide to go all in cash for the next month. It's reasonable to include shut down period into calculation, since the decision was a part of your strategy
you run an algo strategy and suddenly loose access to the market for the next month. For the purpose of evaluating the strategy it makes sense to exclude that period altogether. At the same time if you have a way to reasonably simulate the performance during that month the investors may ask to include that in the overall stats to make sure you're not excluding periods with bad performance.