tag:blogger.com,1999:blog-4528393111359731672.post2049266989992967610..comments2017-07-22T08:09:02.727+01:00Comments on Green All Over: Sharpe LinesCassinihttp://www.blogger.com/profile/05879449876804295094noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-4528393111359731672.post-46861180752027867662016-10-10T19:22:52.396+01:002016-10-10T19:22:52.396+01:00One thing I have noticed with Sharpe Ratio (SR) is...One thing I have noticed with Sharpe Ratio (SR) is that it is dependent on sample size. As sample size increases then all things being equal so does SR, which doesn't seem helpful to me.<br /><br />SR = average yield / stdev yields<br /><br />Try it with a spreadsheet. Have a set of yields that has the same average yield for 10, 20, 40, 80 and so on returns. You can achieve this with just two values and repeating throughout the samples. (e.g. 1.2 and 0.8 - it will give an average of 1.0 for simplicity)<br /><br />Then calculate the stdev for the 10, 20, 40, 80 and so on and then do the SR calculation for each. You will see a rising SR.<br /><br />I used to do an SR for daily yields and it was very low. Positive but low. I did weekly and it was higher, monthly higher still (over the magic 2.0) but I was still averaging the same yield.<br /><br />I still use SR in my optimisations but I have other metrics too and take all of them together.Jameshttp://www.blogger.com/profile/05075123015442859635noreply@blogger.com