# Questions tagged [sharpe-ratio]

Excess return per unit of deviation in return.

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### Relationship between holding time and sharpe ratio

Let's say, for simplicity, I have a long-only portfolio $P$ that consists solely of equity. The average holding period for each asset is $n$ days. Are there research papers or theorems that ...
522 views

I've found a ton of sources that mention the classic rule of "If the Sharpe ratio of the new asset is greater than the Sharpe ratio of the existing portfolio times the correlation of the existing ...
1 vote
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### How does one show that the Sharpe Ratio is closely related to the t-statistic of the mean differential return?

I see it being mentioned in many places, such as here, and even here. How should I interpret it? Suppose I have an array of signals, I, and returns of those signals, R Then my regression is R = a + BI ...
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### Does imbalance not impact returns-calculation weighing when calculating the Sharpe Ratio of an equity Long-Short strategy?

I'm calculating the Sharpe Ratio for a simple equity long-short strategy (short stock S and use proceeds to buy stock L). Obviously this is self-financing. In "https://quant.stackexchange.com/...
26 views

### Supervised metric including beta?

I am working in a supervised ML framework. I'd like to define one metric to evaluate a strategy. Naturally I was initially enclined towards overall returns or sharpe ratio. I'd like to implement a ...
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### Squared Sharpe Ratio - Fama and French

I am investigating various versions of nested and nonnested Fama and French factor models. Performance of the models is compared on the basis of Squared Sharpe Ratios. Bariallas et al. (2020, JFQA) ...
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### Figuring out how TradingView calculates the Sharpe ratio [closed]

This is the simplest backtest I've come up with, yet I can't figure out how TradingView has calculated the Sharpe ratio to be 0.577. I've set the risk_free_rate=0. Is it possible to extract the ...
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### Mixing Max Drawdown and Sharpe Ratio in a single utility function : is there a standard approach?

We know that 2 strategies can give the same Sharpe Ratio, but with different Maximum Drawdown. I computed myself these 2 strategies having the same cumulative return and SR, but with considerably ...
1 vote
139 views

### Why isn't the Sharpe Ratio computed on the cumulative return rather than return mean? [closed]

I have learnt that the Sharpe ratio is a measure of the annualized return rate mean over the annualised standard deviation of return rate distribution. I also learnt that when compounding, the mean of ...
48 views

### alternatives of sharpe's ratio with respect to maximum-drawdown(mdd)

Given a window, expected return divided by standard deviation is sharpe's ratio. But I want to form another figure for mdd-adjusted return. mdd divided by expected return can be suggested but it seems ...
1 vote
174 views

### Derivation Treynor-Black model

In the treynor-black model the assumption is that markets are not fully optimal and it is possible to achieve additional alpha on top of the market portfolio. After a mean-variance optimization ...
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### How to Maximize Portfolio Sharpe Ratio using Lagrange Multipliers in a Factor Model

I've come across the notes of the 2003 lecture "Advanced Lecture on Mathematical Science and Information Science I: Optimization in Finance" by Reha H. Tutuncu. It describes on page 62 in ...
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### Is there a formal notion of a "reward measure"?

A risk measure, as defined in the Wikipedia page, is a function that maps random variables to real numbers and satisfies the normalized, translative, and monotone properties. There are many other ...
172 views

### Finding latest market price of market portfolio according to No Arbitrage

In Excel, I have the monthly stock price data for the past few years for Asset A and Asset B. I have calculated the monthly returns, mean returns, variances, and standard deviations for both stocks as ...
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### Test significance of Sharpe ratio using machine learning

I am trying to create forecasts for ETF returns using machine learning tools and I am creating mean-variance portfolios based on these forecasts. I want to compare the Sharpe ratios of these different ...
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### 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 ...
143 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 ...