New answers tagged sharpe-ratio
3
Yes, Sharpe follows a student's t distribution.
https://alo.mit.edu/wp-content/uploads/2017/06/The-Statistics-of-Sharpe-Ratios.pdf
2
Whereas the Sharpe ratio divides the risk premium (mean excess return) by the volatility, the Sortino ratio instead divides by semideviation: the standard deviation computed using only negative returns.
For perfectly symmetric return distributions, these should not differ much. However, if a return distribution has skewness, then the Sortino ratio may be ...
4
It usually depends on:
the reason why the strategy was shut down
what are you using the sharpe ratio number for
Examples:
you're a discretionary trader and at a certain point decide to go all in cash for the next month. It's reasonable to include shut down period into calculation, since the decision was a part of your strategy
you run an algo strategy ...
-1
OK, easy enough to answer with complicated formulae...
A- you've just given me a monthly Sharpe Ratio, calculated on daily returns. Or in fixed income jargon, a 21d1d Sharpe!
The obvious point being that you could give me a Sharpe Ratio based on rolling 3 day returns over the last 5 days. It might be completely meaningless to do so; but the ratio can be ...
1
For anybody still following this:
I figured out that the equations and my code work fine; the problem was that I had to scale the returns before doing the risk calculations to avoid float32 precision data loss, and also just that my value for η was far too high. Lowering my η value to <= 0.0001 produces totally logical sharpe and sortino approximations. ...
-1
The answers to your questions vary -- not because the answers are not precise but because Sharpe ratios are often used for marketing.
The Correct Estimator of a Sharpe Ratio
If we are trying to be correct (and not trying to fool ourselves), the expected Sharpe ratio $S_P$ for portfolio $P$ would be simply $E(S_P) = E\left(\frac{r_P-r_f}{\sigma_P}\right)$ for ...
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