Can I keep my Sharpe ratio higher then 4 for the rest of the year?
- Thread starter macintash
- Start date
PS I didn't mention, that above 4 isn't really going to happen for time frames beyond a few months imo................
I didn't say impossible, I said extreme unlikely. I've seen some high Sharpes for LJM for a given year (such as say, 2006) but I'd like to see some supporting documentation *from LJM* if you are claiming a Sharpe of over 4 for 10 consecutive years.
Within 3 years is this retail OP going to be this guy (and I mean no disrespect to feng, it is a great learning experience that he posted this and it will undoubtedly save a few accounts): http://www.elitetrader.com/vb/showthread.php?s=&threadid=233378
Or http://www.ljmpartners.com/english/history.php
Within 3 years is this retail OP going to be this guy (and I mean no disrespect to feng, it is a great learning experience that he posted this and it will undoubtedly save a few accounts): http://www.elitetrader.com/vb/showthread.php?s=&threadid=233378
Or http://www.ljmpartners.com/english/history.php
You stated neither impossible nor extremely unlikely. Which category does LJM fall into? They're not HFT and they've been producing a Sharpe over 4 for nearly 13 years. LJM is empirical proof of why Sharpe is worthless for measuring performance.
I mentioned a German exotics trader in another thread that produced a Sharpe >7 his entire professional career.
From your equity curve, it does not look very likely that you will keep the high Sharpe. I am not sure whether you are so into it anyway, unless you are managing OPM or want to have a good record to raise funds.
Pursuing high sharpe ratio is the wrong goal as I demonstrated earlier in my Kelly argument. You want to make the more money, while staying under BP constraint. You want to leverage your edge to make the most money while stay under your comfortable risk level/max daily loss.
I was having a 60 day running sharpe of 8 in the first 3-4 months of last year. Then the summer came and market was more volatile. I ended year for a whole year sharpe of 3.2.
When market is very calm it is easy to get high sharpe doing market making strategies. However market can turn on a dime, which leads to higher daily range/high account daily standard deviation. However buying power restrictions will be relaxed (I have a few IB PM accounts). While my sharpe dropped significantly for the rest of the year last year, I was making more money.
njrookie
Pursuing high sharpe ratio is the wrong goal as I demonstrated earlier in my Kelly argument. You want to make the more money, while staying under BP constraint. You want to leverage your edge to make the most money while stay under your comfortable risk level/max daily loss.
I was having a 60 day running sharpe of 8 in the first 3-4 months of last year. Then the summer came and market was more volatile. I ended year for a whole year sharpe of 3.2.
When market is very calm it is easy to get high sharpe doing market making strategies. However market can turn on a dime, which leads to higher daily range/high account daily standard deviation. However buying power restrictions will be relaxed (I have a few IB PM accounts). While my sharpe dropped significantly for the rest of the year last year, I was making more money.
njrookie
Did you read my previous post?
Lets be real, we're talking about the OP and the likelihood that he's in that high percentile. I don't disagree with anything you wrote
edit - since everyone is talking about the validity of sharpe -- it is NOT the end all of ratings. Like I said, great systems have low sharpe r. It is a good starting point when starting a brand new system build though. The name of the game is to have all of your quant data (lets say 38 data points per system), interpret the data as you go along building a system, and using the data real time to allocate capital and determine how stable your system is moving forward.
In a way you are hinting at the flaws with a standard Sharpe ratio but the focus is really on evaluating how much reward are you getting for a unit of risk, not so much what is going to end up with the best total return.
The Sharpe vs. MAR. vs. Modified Sharpe vs. Sortino vs. Ulcer Index vs. etc is a debate which can rage for a very long time and at some point tends to become like discussing religion. It is really a personal thing beyond a certain point (unless you run OPM, particularly institutional money, then a few of those really do matter a lot).
I'm a MAR man myself but to each their own
The Sharpe vs. MAR. vs. Modified Sharpe vs. Sortino vs. Ulcer Index vs. etc is a debate which can rage for a very long time and at some point tends to become like discussing religion. It is really a personal thing beyond a certain point (unless you run OPM, particularly institutional money, then a few of those really do matter a lot).
I'm a MAR man myself but to each their own