is Sharpe ratio the best way to measure performance?

Discussion in 'Risk Management' started by PnL Rally, Jan 14, 2008.

  1. Are there any accepted performance metrics that do not take into account the risk free rate or a benchmark return?

    Subtracting the risk free rate makes sense for a calculating the Sharpe ratio of a fund, but makes little sense for measuring the performance of a day trader as it would penalize the day trader with the least amount of leverage all else being equal (prop traders vs retail).

    Also, calculating the Sharpe ratio for a series of returns going back 5 years would require finding the TBill rates over this time period.

    Does anyone know an accepted performance metric that only takes into account the stream of returns, and not the risk free rate or some benchmark return rate?
  2. Shagi


    these ratios are wogwash stuff . largest % gain with minimum % drawdown is whats in my books
  3. Sortino ratio = avg. annual ROR% / max. DD %
  4. Whops thx for correction!
  5. 1) Net Alpha 2) A trader's position on the Forbes 400 list. 3) Number of Google hits. 4) Number of references on an search.
  6. Nazz,

    1) Any specific "net alpha" figure you´re impressed about ? Maybe you want to list some HF´s or other "special investment vehicles" ?

    2) Can I find you on Forbe´s 400 list ?

    3) :D :D :D

    4) :D :D :D
  7. 1) If one can consistently exceed the S&P by 200 basis points over the long-term without losing years, the media will revere you.
    2) I might show up on a Forbes-40,000,000 list.
    3) On Google, my user name shows up ~50 times.
    4) 552?
  8. ssss


    Depend from objective ...

    Great return in most of the case in history
    related to great risk .

    Thingiz-Khan (most wealthy person in history)

    Cortes,Pissaro (Gold ) , Napoleon &

    Sharp ratio for specific kinds of investors .

    If operator ready to loss all,what was invested in account (more of 90% of all retail operators loss ,in retail fx average
    account live expectance -45-60 days)
    he need not Sharp ratio ...
  9. I believe the best approach and what I use is to assign 2 drawdown goalposts and to aim at falling in between the 2. Then periodically adjusting the trade sizes to suit. For example a monthly 3% and 6% drawdown. This is better than sharpe becasue some drawdown is perfectly OK, it's just the outer limits of drawdown that are a real problem.
    #10     Jan 22, 2008