Questions tagged [sharpe-ratio]
Excess return per unit of deviation in return.
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How can i get sharpe ratios for each month?
I am currently trying to calculate Sharpe Ratios of each blockchain ETF and cryptocurrencies. So far I have taken annual returns and calculated the Sharpe Ratio from that. For the standard deviation, ...
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111 views
Is this quadratic form the Sharpe ratio?
I'm reading Merton's An Analytic Derivation of the Efficient Portfolio Frontier. In section IV, he derives the efficient frontier with a riskless asset. Let $\mathbf{w}$ be a vector of portfolio ...
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92 views
mean-variance optimization === max sharpe ratio portfolio?
Noobie here. I just wanna ask a simple question:
in the context of portfolio optimization, is Mean-Variance optimization the same as the max sharpe ratio portfolio?
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39 views
Compute Sharpe ratio and annualized Sharpe on captured bar returns or trade returns?
I am currently using a vectorized backtester where I have a strategy_returns series which is just a version of the bar-to-bar ...
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39 views
Confidence in Sharpe ratio given performance
Suppose I have a strategy that I believe has a Sharpe ratio of X - not the Sharpe ratio of the backtest (this can be absolutely determined), but the ratio I expect it will actually take on over the ...
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54 views
Sharpe ratio and uniformly distributed random portfolio
I am currently working on this paper which derives the Sharpe ratio distribution of uniformly random porfolios:
https://www.researchgate.net/publication/...
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47 views
Does the interval of a portfolio's returns affect Sharpe and Sortino? If so, what's the gold-standard interval?
I'm currently creating a backtesting script and I've got to the point of calculating risk metrics.
It seems like the interval (daily, weekly, or monthly) I use for returns heavily changes the ...
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89 views
Practical implications of Andy Lo paper on Sharpe ratio using quarterly returns?
I am hoping to determine the practical implications of the Andy Lo paper criticizing the use of a scaling factor in converting periodic Sharpe ratio to annualized Sharpe ratio. I am particularly ...
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51 views
How do I calculate the sharpe ratio of a portfolio of stocks?
If I have daily prices for $N$ stocks, how do I calculate the Sharpe ratio for an equal volatility weight portfolio?
On each day, I have calculated log returns as:
$$
r_{t}^{s} = \ln{price_{t}\over{...
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40 views
calculate Sharpe ratio of weekly returns
For weekly returns Rt, how to get annualized return and calculate Sharpe rate?
Some say the "annualized Sharpe ratio" = "weekly Sharpe ratio" * sqrt(52). But if one annualize Rt ...
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84 views
Optimal active risk
Can someone help me prove the statement or share a link of the proof -
"The optimal amount of active risk is the level of active risk that maximizes the portfolio’s Sharpe ratio. This optimal ...
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1answer
160 views
Maximum Sharpe ratio and mean-variance optimization
I want to understand why this holds:
$argmax_w ( \frac{\mu^T w}{\sqrt{w^T\Sigma w}})=\Sigma^{-1}\mu $
I just found this post:
Derivation of the tangency (maximum Sharpe Ratio) portfolio in Markowitz ...
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198 views
Sharpe Ratio - Daily vs Annual
How do I go from daily to annual sharpe?
Say I have an asset with average daily return of 0.1% and a daily return standard deviation of ...
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123 views
Comparing Negative Sharpe Ratio
It is widely accepted that the higher the Sharpe Ratio, the better. But, how do we compare two strategy with negative Sharpe Ratio?
Suppose we have two trading strategy $A$ and $B$. Consider the ...
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1answer
69 views
relation between risk averson coefficient and maximum Sharp ratio in Black-Litterman context
BL model compute the implied returns based on the reverse optimization where the objective is:
$${\underbrace U_{{\rm{investor's \ risk \ utility}}} \buildrel \Delta \over = {\bf{w}}_M^T{\bf{\Pi }} - \...
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88 views
Sharpe Ratio of a Long-Short Portfolio
I have a portfolio High and Low (according to the highest profit). From this I have formed my long short portfolio and calculated my Sharpe Ratio. How to interpret this correctly? Does a positive ...
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28 views
What should be the duration over which the Sharpe Ratio, particularly for mutual funds, is calculated and why?
Usually people use daily or monthly returns in the calculation of sharpe ratio.
What is the reason for this granularity?
Is this granularity dependent upon the type of asset? As in, stocks are ...
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38 views
Factor Models vs. Risk-Adjusted Performance Measures
I am building a study focusing on portfolio returns relative to a number of portfolios constructed using various ESG screening techniques. My intention is to measure and compare the performance of '...
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80 views
Standardizing Sharpe Ratio or not when standardizing Features
I am currently trying to check the Feature Autocorrelation for a Trend Strategy. I am using XGBoost for that purpose. In addition I work with SHAP.
In the first run I realized that without ...
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393 views
why does Cross Validation *not* solve Backtest overfitting?
In this famous paper, Bailey and De Prado discard Cross Validation as tool to check for Backtest overfitting, on the ground that it is just an holdout method:
... If we apply the holdout method ...
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52 views
Correct way of making sharpe optimized portfolio?
I have monthly returns of about 977 securities of past 10 years.
If I keep the returns as it is i.e. I do not multiply by 100 and keep the returns as 0.1, 0.2 , -0.3, 1.2
then I get different results ...
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36 views
What does negative proportion mean in sharpe optimization model?
Using the last 20 days of market return and some stocks return I made sharpe optimial portfolio and following were the stock names and investment proportion to be made.
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62 views
Can I use Sharpe optimization model for short term portfolios?
I wanted to know if there are any mention of what is optimal lookback period i.e. how many days, weeks, months or years of return data I should consider for constructing sharpe optimal portfolio and ...
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1answer
81 views
How to test the difference between samples of sharpe ratios
I am testing the performance difference between 2 portfolio strategies. I use Monte Carlo simulation in R to generate $N$ simulations of portfolio returns for each strategy. I then compute the Sharpe ...
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1answer
100 views
Why not calculate Kelly using semivariance? As w Sortino
Kelly is calculated as mu / sigma^2. If we remove our highest performing returns from our calculations this actually increases our Kelly leverage, which does not make sense to me. A less profitable ...
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50 views
How to calculate sharpe ratio for a strategy that has a stoploss and a profit exit condition?
I am working on a pair trading strategy, which either books a profit or holds the position till it hits stop loss over multiple days. I have months where I don't hit stop loss at all and this makes ...
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180 views
Optimise the Sharpe ratio of a portfolio of uncorrelated assets
Given a portfolio of $n$ assets, mean returns vector $\mu$, covariance matrix $K$, one can calculate the portfolio weights $w^*$ that maximise the portfolio Sharpe ratio, by solving:
$$w^*=\text{...
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134 views
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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55 views
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
145 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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94 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
67 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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81 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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83 views
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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46 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
347 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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141 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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139 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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51 views
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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76 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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185 views
calculating sharpe and sortino ratio given monthly returns [closed]
suppose I have (fictitious) monthly returns:
...
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57 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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128 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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57 views
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
338 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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67 views
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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379 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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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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377 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 ...
