Can I keep my Sharpe ratio higher then 4 for the rest of the year?

[macintash]

Sharpe ratio more then 4 for 2012, that’s my target. I know that would not be easy and I would need to work hard for this. I will share my ups and downs here.

 

[macintash]

Any thoughts if that’s a reasonable target?

 

[mickson]

Almost impossible. Sorry the probabilities are slimmer than Ben Bernanke raising interest rates in the next 3 months.

Show us your equity curve how you have achieved it so far.

 

[tenthousandmen]

does your system(s) say 4+?

my sharpe is much higher than usual, although I dont focus on sharpe so much anymore because of exponential equity curves

 

[mickson]

I always recommend to people who show me incredible Sharpe ratio's to consider whether they think they are amongst the best in the world. I see it often with "curve fitted" oops I mean backtested results.

These are averages and last year was a tough one for the industry. However, anyone producing a Sharpe above 2 is frankly shooting the lights out.

>4 that is unbelievable or unsustainable.

 

[macintash]

Quote from mickson:

I always recommend to people who show me incredible Sharpe ratio's to consider whether they think they are amongst the best in the world. I see it often with "curve fitted" oops I mean backtested results.

These are averages and last year was a tough one for the industry. However, anyone producing a Sharpe above 2 is frankly shooting the lights out.

>4 that is unbelievable or unsustainable.

What you are saying makes sense, I know its hard, but do you think its impossible?
I have attached my equity curve YTD.

 

[mickson]

Certainly not impossible but HIGHLY unlikely.

Let make a suggestion that may save you a lot of money.

Setting unlikely goals often leads to failure. I am not quite sure of what your motivation is to go for a >4 Sharpe ratio. Is it to be noticed on ET, is it to inflate your ego, is it to become rich?

I don't expect a response to these personal questions.

Why not set a goal of maintaining a Sharpe ratio >1 this will already put you ahead of the majority (vast majority).

Setting unreasonable goals and then trying to chase them is a sure recipe for disaster.

Good luck. I would be happy to be proved wrong but think about the probabilities.

Mike

 

[d08]

Quote from mickson:

I always recommend to people who show me incredible Sharpe ratio's to consider whether they think they are amongst the best in the world. I see it often with "curve fitted" oops I mean backtested results.

These are averages and last year was a tough one for the industry. However, anyone producing a Sharpe above 2 is frankly shooting the lights out.

>4 that is unbelievable or unsustainable.

It's not fair to compare billion dollar funds to small traders, it's an entirely different game.
Having said that, a long term Sharpe of 4 is not realistic. I would guess very private HFTs achieve that though.

 

[mickson]

It's not fair to compare billion dollar funds to small traders, it's an entirely different game.

Who has the advantage the big guy or the small guy?

If the big guy has an advantage then surely it is a fair reference point for a small guy trying to beat the reference point?

 

[d08]

Quote from mickson:

Who has the advantage the big guy or the small guy?
If the big guy has an advantage then surely it is a fair reference point for a small guy trying to beat the reference point?

It's not that simple. Big funds are always thinking of scalability which limits returns immensely while the small traders don't need to consider it at all. There is no easy answer here as styles and instruments can be very different.