# Tag Info

## Hot answers tagged sharpe-ratio

Let $R$ be a random vector of risky returns and let $r_f$ denote the risk free rate. Let vector of expected returns $\boldsymbol{\mu} = \operatorname{E}[R]$ and covariance matrix $\Sigma = \... • 6,974 11 votes ### How to calculate Sharpe Ratio from$ returns?

Let's say your cumulative return series is $\{R_i \mid i=0,1,...,N-1\}$ of length $N$ days. There's 3 conventional ways to do this at this stage. You may convert the cumulative dollar return curve ...
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### Maximum Sharpe portfolio (no short selling restrictions)

There are two cases, where short sales are allowed: With riskless lending and borrowing and without. As mentioned in the comments, you just have to solve a linear system. With riskless lending and ...
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### What is the industry standard way of calculating and annualizing performance metrics?

To give you an idea of industry standards for funds (although not hedge-fund specific), Morningstar and Trustnet both use monthly returns and annualize their data. See, for an example plucked at ...
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### Sharpe Ratio and Sortino Question: Standard practice

Theoretically, Sharpe should be the average of (compounded) excess returns divided by the volatility of the same. It was designed to measure the risk-reward preferring the risk asset to riskless. So ...
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### What is stopping me from using high leverage on high Sharpe strategies?

Not sure if "3-4 Sharpe" indicates the value of the Sharpe ratio you're earning since such magnitude is meaningless without some benchmark to compare against, due to it being a purely ...
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### Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?

Portfolio risk metrics matter a lot for all fund managers. Though certain type fund vehicles can have completely different sets of performance metrics. It's hard to imagine a Venture Fund analyzing ...

### Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?

The Sharpe ratio and the Sortino ratio are not under the control of the ETF managers, they will be equal (or very close) to the ratios for the Index that the ETF tracks. There is not much room for ...
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### Risk Compensation

A linear relationship between expected returns and covariance with a risk factor is a necessary consequence of a linear asset pricing function In theory, a CAPM relationship can be derived when a ...
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### How can I find the portfolio with maximum Sharpe Ratio - Using Lagrange Multipliers

The trick is in the transformation of the constraints used to solve the optimisation problem. This can be seen in the definition of the set $\chi^+$ in the two lines following equation 5.4 of Tütüncü. ...
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