Questions tagged [sharpe-ratio]
Excess return per unit of deviation in return.
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Convex optimization of ex-ante information ratio
I am trying to optimize an ex-ante information ratio using a convex optimizer. I have started with the Sharpe ratio and have managed to reform it into a conic problem as such:
https://people.stat.sc....
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Do options have diversification benefit?
Imagine the universe where we have one investable volatile asset but with an available liquid options chain for it.
The question: can a portfolio consisted of this asset, and some options have any ...
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1answer
74 views
How to compute a portfolio PnL and Sharpe?
I understand this is quite the common question but I haven't been able to understand this concept through the previous posts.
My situation is that each day, I'm interested in buying/selling one ...
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52 views
Sharpe ratio from second returns? HFT
I have an intraday trading strategy so I take several positions each day. I have prices for each stock, with a 10 second resolution. So the data looks like this:
...
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1answer
53 views
Optimal Portfolio Formulation
I'm currently studying Luenberg's Article "Projection Pricing" (Jrl of Optimization Theory and Applications, Vol. 109, No. 1, pp. 1–25, April 2001) and there is a claim that I can't prove.
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78 views
From annualized Sharpe Ratio to number of daily losses
I have seen a few statements that link a particular annualised Sharpe Ratio to the likely frequency of 'loss day' across a given period:
e.g. "A annualised Sharpe Ratio of X, implies the ...
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Did annual Sharpe ratio follows T distribution?
Under some special condition, Sharpe ratio can be annualized by multiply $\sqrt{252}$, Since daily Sharpe ratio ($\frac{mean(r)}{std(r)}*\sqrt{T}$) follows student T distribution with degree of ...
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35 views
What does p-value adjustment under FWER do?
The background is I am predicting a time series with three strategies, the hypotheses is the strategies have a non-zero Sharpe ratio.
I am reading Backtesting, by Campbell Harvey and Yan Liu paper in ...
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3answers
327 views
Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?
Do passive ETF fund managers care about portfolio metrics such as Sharpe ratio and Sortino ratio?
I understand hedge fund managers care about these risk metrics for their investors. What about the ...
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1answer
76 views
Are there better performance measures for mean-reverting vs trend-following trading strategies?
The Sharpe ratio is often used as measure to assess risk-adjusted returns of trading strategies. However, there are also other measures that can be used to assess risk-adjusted returns like the ...
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2answers
107 views
Statistical distribution of Max Drawdown
Are there any good papers/ references on the statistical distribution of Max Drawdown over a specified amount of time given a specified Sharpe? Assuming returns are iid normally distributed
I’ve been ...
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Capital efficiency of event triggered strategy
Let's assume we have two long short equity strategies A, B with a Sharpe ratio of 2 each. ...
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60 views
Optimising returns weighted by Sharpe ratio in the context of Supervised Learning
In the Kaggle Jane Street market prediction competition we are put in a Supervised Learning Framework to deal with 'trade opportunities'. That is, we are given instances of previous trade ...
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Performance metric that integrates market volatility?
Is there a performance metric like Sharpe that takes into account the volatility of the current market instead of only the volatility of the fund? I believe investors may have different degrees of ...
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2answers
124 views
calculating sharpe and sortino ratio given monthly returns [closed]
suppose I have (fictitious) monthly returns:
...
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1answer
45 views
how to use SOFR as risk free rate in portfolio construction
Good afternoof to everyone.
I would like to create a portfolio following a multifactorial approach (I have been writing my master's thesis). As I would like to calculate a series of ratios (e.g. ...
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1answer
113 views
Sharpe Ratio Graphed Over Time
I looked and could not find a suitable answer to my question already, so:
What is the best way to calculate the Sharpe Ratio over time, given I have about a decade's worth of 1-minute candlesticks?
I ...
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0answers
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Should the sharpe ratio always change with number of assets?
I am trying to understand if the Sharpe ratio of a portfolio change if we increase or decrease the number of assets in the portfolio. It would be helpful if you could provide an explanation with ...
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3answers
238 views
What is stopping me from using high leverage on high Sharpe strategies?
Say the example market return is 12% for the year, I managed to develop a 3-4 Sharpe strategy that makes 6% a year. If I can borrow twice the size of my original fund at 0% interest, I can make more ...
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Measuring Information Coefficient and Sharpe Ratio
I have been looking through / using Quantopians' Alphalens library to measure/create new factors, and I had some questions in evaluating the credibility of the factor.
This is what I have:
I have ...
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211 views
Can I use the Sharpe Ratio as an objective function in algorithmic trading?
I’m experimenting with custom loss functions for different trading rules and have come across a few articles citing success in directly using the (negative) Sharpe Ratio as a loss function, ...
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2answers
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Industry or academic standard frequency to report the return, standard deviation, and Sharpe ratio?
Everyone (funds, banks, academics, financial information sites etc.) reports the annualized return, standard deviation, and Sharpe ratio. Yet we never get to know what the basis of their computation ...
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1answer
236 views
Is scaled Sharpe ratio a t-statistic?
I was just reading Quantitative Trading: How to Build Your Own Algorithmic Trading Business and it suggests annualizing Sharpe ratio in order to compare performance of strategies:
$$\text{Annualized ...
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1answer
98 views
Sortino ratio lower than sharpe ratio?
Under what circumstances is a sortino ratio lower than a sharpe ratio? What does it mean about the distribution?
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112 views
Sharpe from signal to daily return correlation
A few years back in an interview I remember being asked to derive the Sharpe ratio from the correlation between a pre-open daily signal and the open-close returns. I think you had to make some ...
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53 views
Should the strategy shut down period be considered when calculating Sharpe?
When computing the Sharpe for a strategy, should the shut down period be considered?
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question regarding sharpe ratio calculation
Hi All: I looked in the search icon for questions related to Sharpe Ratio but I couldn't find what I was looking for. My question is about how to calculate it. I will explain the scenario and then ask ...
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Computing Sharpe ratio correctly when adding more funds
I've a very basic question:
Assume, as time $t_0$, I started a algorithmic trading strategy with initial capital $X_0$. My strategy on subsequent $N$ time frames generated returns $r(t_1), r(t_2),..r(...
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3answers
336 views
Approximating Sharpe and Sortino ratios from Exponential moving averages
So I've been studying the paper "Learning To Trade via Direct Reinforcement" Moody and Saffell (2001) which describes in detail how to use exponential moving estimates (EMAs) of returns at ...
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1answer
88 views
Portfolio vs individual security Sharpe and Sortino ratios
For an individual security calculating it's Sharpe and Sortino ratios is straightforward.
What I'm curious about is the following:
Let's say I have a portfolio of several securities, which is a ...
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354 views
Beta Adjusted Return
I'm a bit confused about the definition of the 'Beta Adjusted Return', say I have benchmark whose return is $r$ and a stock whose return is $R$, the beta adjusted return is defined as
$$ ...
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Question on the details of certain parameters in Sharpe Ratio [closed]
I'm puzzled about certain parameters in calculating the annualized Sharpe Ratio using monthly return data.
Average excess return: Does this mean the arithmetic average of all the monthly excess ...
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2answers
79 views
Portfolio rebalance - How many data back do I need to perform sharpe ratio optimization
if I do a periodical rebalance of my portfolio based on sharpe ratio optimization, how many historical data should I take in account for optimizing with respect to the frequency of rebalancing?
For ...
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48 views
Is this OK for simplifying Sharpe Ratio?
I've tried using Average(return)/StdDev(return) and it seems to work. I just want to see a measure of equity curve smoothness. Are there any downsides to this?
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Questions about Sharpe Ratio calculation
Let's say I have daily returns. Don't they depend on the risk per trade I am using? Obviously, if I'm risking 2% of equity per trade returns will be drastically different than when I'm using 10%? So ...
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annualized sharpe from single day returns with varying cash outlay
Lets say I have a series of daily returns with varying cash outlay. I am trying to take these daily returns to compute the sharpe ratio for the year. my question is about treatment of the weightings.
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1answer
182 views
how to relate risk aversion and sharpe ratio in optimisation
I am trying to optimise the following:
U(w)=w′μ−λ/2w′Σw
which is the typical risk aversion problem.
I would like to set lambda in order to have the max sharpe but I cannot find in literature what is ...
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1answer
212 views
Calculating Sharpe Ratio on a per trade basis?
I have a strategy that I've been playing with and trying to backtest. It's of questionable practicality at the moment, but the idea is to pick one stock from the Dow 30 companies to trade right near ...
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1answer
134 views
How to test signifcance of a sharpe ratio
Let say you have measured a Sharpe Ratio of $S^*$. What is the simplest way (ie no fancy distributions) to do a hypothesis that this is different from $0$?
So $H_0: \text{ The sharpe ratio is equal ...
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1answer
117 views
Which metric is most predictive: Mean, Sharpe, Calmar, …?
Suppose you have created a new trading algorithm:
by varying the params of the algorithm, you get a large number of similar trading strategies (e.g. slightly different trigger thresholds, stop loss ...
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Annualised Sharpe Ratio of a 24/7 Round-The-Clock High Frequency Trading Strategy
Consider a high frequency trading strategy that trades Bitcoin-USD round the clock 365 days of the year at 5-minute intervals. How would one calculate the annualised Sharpe ratio of such a trading ...
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Maximum Sharpe ratio portfolio - derivation
I want mathematical derivation of how to construct maximum Sharpe ratio portfolio. Any resources with mathematical derivation (if its implemented in Python, that will be great) will be useful
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1answer
250 views
Which riskfree rate to use for Maximum Sharpe Ratio Portfolio?
I am conducting out of sample backtests of the MV framework. But how exactly do I derive the Maximum Sharpe Ratio portfolio for this? The standard forumula of the Sharpe Ratio is given by:
$$\frac{(...
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Annualizing the Sharpe Ratio
I am doing some calculations and I am working currently with the weekly Sharpe Ratio. Can I annualize the Sharpe ratio by multiplying with the square root of 52?
Greetings!
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242 views
How to calculate out-of-sample and in-sample Sharpe Ratio?
I am conducting a backtest on different investment strategies and would like to calculate
(i) the out-of-sample Sharpe ratio and
(ii) the in-sample Sharpe ratio according to "Optimal Versus Naive ...
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1answer
134 views
ESG Style Analysis
Hi all and thank you in advance.
Do you think that implementing a style analysis on ESG equity portfolios is feasible?
When I mean style analysis I refer to the seminal paper of Sharpe (1992) but I ...
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Papers with Sharpe Ratio above 3 [closed]
Could you provide examples of academic papers proposing strategies with Sharpe Ratio above 3? Above 4?
Any type of strategy and any mix of asset classes would do. However, a particular interest is ...
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96 views
Sharpe ratio of annualized log returns
I have returns from the last 12 months on a portfolio, and i have risk free rate for the latest year, on daily basis.
I have annualized the risk free rate, and i am using log returns for the period.
...
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269 views
How to derive the CAPM from maximizing the Sharpe ratio?
I know how to derive at the CAPM from a microeconomic foundation. In a recent University course I stumbled over a slide that derived the CAPM solely from the Sharpe ratio:
I cant come up with that ...
