Over 1 is good enough? Over 2 or ever over 3 is something close to holy grail? Do you even care about Sharpe ratio and why?
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
What Sharpe ratio do we need?
- Thread starter GloriaBrown
- Start date
Good enough for what? Anything over 1 is probably good enough to invest your own money in, at least some of it, if you believe it really works. The advantage of a higher Sharpe is that it's more likely that you've got something "real" instead of some spurious back tested pattern that will lose money going forward, and that if it starts underperforming, you can pull the plug faster confident that something is wrong.
Good enough to leverage 3x, 6x, 10x with real money? For that you'll want something much better.
Good enough to leverage 3x, 6x, 10x with real money? For that you'll want something much better.
Good enough for what?
Indeed that is the question. Assuming this in from the pov of a strategy one wants to trade and not invest in, if after controlling for small sample biases, autocorrelation in returns, varying volatility and making sure the strategy is not 'forced' to be a skewed distribution by tricks like selling option premium, crash insurance etc, if one gets anything above 1 or close to it deserves a good look.
IMO of course.
The advantage of a higher Sharpe is that it's more likely that you've got something "real" instead of some spurious back tested pattern that will lose money going forward, and that if it starts underperforming, you can pull the plug faster confident that something is wrong.
You mean in real trading because in backtests all curve-fitted systems have high Sharpe ratio. If you are trading for a year you need a Sharpe above 2.5 to be sure. The more you trade the less the ratio can be but not less than 1.
You mean in real trading because in backtests all curve-fitted systems have high Sharpe ratio. If you are trading for a year you need a Sharpe above 2.5 to be sure. The more you trade the less the ratio can be but not less than 1.
"trading for a year" means holding for 1 year? Why more trades can have less Sharpe ratio and closer to 1?
here's my 2¢: rebalancing would improve performance and low frequency trading often means illiquidity."trading for a year" means holding for 1 year? Why more trades can have less Sharpe ratio and closer to 1?