Incorrect.
In practice, the 'risk free' rate is relative to the investor.
In practice, the 'risk free' rate is relative to the investor.
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Sharpe Ratio questions
- Thread starter HFStartup
- Start date
For absolute return funds, it's often set as 0.
(to be pedantic, there is a formal definition of Sharpe; but it's in the context of CAPM, which is not precisely what people practically use sharpe for)
(to be pedantic, there is a formal definition of Sharpe; but it's in the context of CAPM, which is not precisely what people practically use sharpe for)
Quote from heech:
There is no formal "definition" of Sharpe or risk free rate. It is whatever the investor evaluating the risky investment wants it to be.
LOL. I discuss my funds' performance all day long with prospective investors, and no one has ever cared what the AIMR definition of risk free rate is... or the AIMR definition of anything, really.Quote from dtan1e:
there is such a thing as AIMR definitions, maybe u have been day trading alone for too long
not that i care really, just asking
Oh come on dude, you are the guy who asked such a simple beginner's question as "the US debt rating is no longer risk free as defined in the Sharpe ratio?" and you are now complaining the other guy didn't give you a GIPS compliant definition??
Quote from dtan1e:
there is such a thing as AIMR definitions, maybe u have been day trading alone for too long
not that i care really, just asking
The performances you show are not GIPS compliant? Not sure who your investors are, but most institutional ones do want to see that;
(this is independent of the fact that that dante fella is kind of a douche for calling you out on AIMR definition)
(this is independent of the fact that that dante fella is kind of a douche for calling you out on AIMR definition)
Quote from heech:
LOL. I discuss my funds' performance all day long with prospective investors, and no one has ever cared what the AIMR definition of risk free rate is... or the AIMR definition of anything, really.
They aren't. I'm trading a futures only fund, and NFA has its own rules on performance presentation/calculation. That doesn't extend as far as rf and Sharpe... but I don't think anyone cares.Quote from DontMissTheBus:
The performances you show are not GIPS compliant? Not sure who your investors are, but most institutional ones do want to see that;
I suspect most institutional investors are really running their own numbers on the basis of my monthly (or even daily) numbers, anyways. They aren't looking just at Sharpe, but the distribution.
Quote from DontMissTheBus:
Oh come on dude, you are the guy who asked such a simple beginner's question as "the US debt rating is no longer risk free as defined in the Sharpe ratio?" and you are now complaining the other guy didn't give you a GIPS compliant definition??
hey man, don't get all twisted in knots, sure its simple but not when u try to implement, if u don't use a GIPS compliant definition how is your investor going to compare your performance if your definition is risk free is whatever u consider it is, talking about simple minded