Calculating Sharpe Ratio

Discussion in 'Strategy Development' started by mahras2, Oct 14, 2005.

  1. mahras2


    Hey guys I have calculated my daily sharpe ratio but I think that I have probably done something wrong. I am particularly concerned about the Risk free rate. Would be grateful if someone could check it over:

    Standard deviation: 5.14
    Mean Return: 1.69
    Risk free rate: 0.4447

    Daily Sharpe: 0.24
    Annualized Sharpe: 3.86

    Does this look right? For the ROR I basically used the yeild on the 3 month Tbills which is 3.53 and then multiplied it with the squareroot of 1/63 (63 trading days per 3 months so this should give the daily rate).

    Is this correct? Thanks.
  2. Yield on bonds is per year no matter what maturity. In your example, 3month Bill earns 3.6 per year, not for 3months.