Questions tagged [sharpe-ratio]
Excess return per unit of deviation in return.
243
questions
0
votes
0
answers
37
views
Skewness consideration for Sharpe Ratio
I have calculated Skewness of the full time period monthly returns for all the portfolios 50-50 Gold Sensex, 50-50 USA Sensex and Sensex and they at worst indicate moderate skew so this suggests ...
1
vote
0
answers
59
views
I am comparing two assets Rolling 10 Year Sharpe Ratios. I want to know what percentage increase in Sharpe Ratio is meaningful?
If Asset A is having 35% higher Sharpe Ratio than Asset B is that significant? Or should I consider that only if Asset A is having 50% higher Sharpe Ratio than Asset B.
2
votes
0
answers
50
views
how to calculate the Sharpe ratio based on a list of trades, with space between them?
First, there are a few things I'm not clear about, like what the 'risk free' return is.. is there even such a thing in trading? or how to handle inactive days, etc.
Let's assume I have a period of 30 ...
0
votes
1
answer
88
views
long short portfolio sharpe ratio
What is the proper way to caluclate sharpe ratio for the long short portfolio? When I calculate daily return with no cost, I use this formula: (return for long k.mean()+ (-1)*(return for short k.mean()...
4
votes
0
answers
88
views
Why does the mean term have a higher effect than the covariance term in MV optimization? [closed]
I am trying to use the mean-variance (MV) optimization framework. When I change the mean term using future-ground-truth return (I am not supposed to do so), it has a higher effect on the MV ...
0
votes
0
answers
37
views
Tangency portfolio negative maximum Sharpe ratio
Suppose I have three assets: the market, factor A and factor B. The market is in excess returns of the risk free rate. The other two factors are long-short portfolios. I have net returns for these ...
2
votes
1
answer
82
views
statistically compare 2 sharpe ratios
I have a problem regarding comparing sharpe ratios of portfolios. As an example: I have constructed a portfolio from monthly data over 5 years, giving me a sharpe ratio of 0.85. I have a portfolio ...
0
votes
1
answer
56
views
Calculating Sharpe Ratio with semi-standard deviation
Would it make sense to calculate the Sharpe Ratio with the semi-standard dev. So as to standardize/compare asset returns to their downside risk?
2
votes
1
answer
122
views
How to annualize Sharpe Ratio if monthly returns are serially correlated? Calculation of autocorrelations
I am looking at a data set of 60 monthly returns (last 5 years) and want to calculate an annualized Sharpe Ratio.
The usual way of doing this is to calculate the monthly Sharpe Ratio first, and then ...
0
votes
1
answer
77
views
efficient frontiers are equal
I created 3 different efficient frontiers with 3 different risk factors(sharpe ratio, ulcer performance index and serenity ratio) and I wanted to find both MSR and GMV(and their equivalent for the ...
0
votes
0
answers
28
views
How to control for Portfolio Margin Equity Retuirements when calculating risk vs. return (Sharpe) [duplicate]
What is the best way to control for varying margin requirements for 2 different equity securities when calculating Sharpe ratio (or any other risk return metric)? Suppose I have equity security A ...
0
votes
0
answers
44
views
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, ...
1
vote
1
answer
135
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 ...
3
votes
1
answer
184
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?
0
votes
0
answers
44
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 ...
1
vote
1
answer
69
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 ...
1
vote
0
answers
58
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/...
0
votes
0
answers
51
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 ...
0
votes
0
answers
90
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 ...
2
votes
0
answers
81
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:
$$
r_{t}^{s} = \ln{price_{t}\over{...
0
votes
0
answers
57
views
calculate Sharpe ratio of weekly returns
For weekly returns Rt, how to get annualized return and calculate Sharpe rate?
Some say the "annualized Sharpe ratio" = "weekly Sharpe ratio" * sqrt(52). But if one annualize Rt ...
0
votes
0
answers
128
views
Optimal active risk
Can someone help me prove the statement or share a link of the proof -
"The optimal amount of active risk is the level of active risk that maximizes the portfolio’s Sharpe ratio. This optimal ...
1
vote
1
answer
278
views
Maximum Sharpe ratio and mean-variance optimization
I want to understand why this holds:
$argmax_w ( \frac{\mu^T w}{\sqrt{w^T\Sigma w}})=\Sigma^{-1}\mu $
I just found this post:
Derivation of the tangency (maximum Sharpe Ratio) portfolio in Markowitz ...
1
vote
1
answer
319
views
Sharpe Ratio - Daily vs Annual
How do I go from daily to annual sharpe?
Say I have an asset with average daily return of 0.1% and a daily return standard deviation of ...
1
vote
0
answers
258
views
Comparing Negative Sharpe Ratio
It is widely accepted that the higher the Sharpe Ratio, the better. But, how do we compare two strategy with negative Sharpe Ratio?
Suppose we have two trading strategy $A$ and $B$. Consider the ...
2
votes
1
answer
73
views
relation between risk averson coefficient and maximum Sharp ratio in Black-Litterman context
BL model compute the implied returns based on the reverse optimization where the objective is:
$${\underbrace U_{{\rm{investor's \ risk \ utility}}} \buildrel \Delta \over = {\bf{w}}_M^T{\bf{\Pi }} - \...
-4
votes
1
answer
131
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 ...
0
votes
0
answers
34
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 ...
0
votes
1
answer
100
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 ...
5
votes
1
answer
442
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 ...
0
votes
0
answers
54
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 ...
0
votes
0
answers
39
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.
...
0
votes
0
answers
65
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 ...
2
votes
1
answer
107
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 ...
0
votes
1
answer
114
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 ...
1
vote
1
answer
264
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{...
2
votes
0
answers
58
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 ...
1
vote
1
answer
209
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 ...
0
votes
0
answers
140
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:
...
2
votes
1
answer
76
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.
...
1
vote
0
answers
84
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 ...
2
votes
0
answers
89
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 ...
2
votes
3
answers
355
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 ...
0
votes
1
answer
166
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 ...
3
votes
2
answers
170
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 ...
0
votes
0
answers
58
views
1
vote
1
answer
56
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. ...
1
vote
0
answers
92
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 ...
0
votes
2
answers
259
views
calculating sharpe and sortino ratio given monthly returns [closed]
suppose I have (fictitious) monthly returns:
...
0
votes
1
answer
65
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. ...