Sharpe > 2.0?
Sharpe > 2.0?
Is it possible to build a medium to long term trend following strategy with a sharpe ratio > 2.0, or is this simply unheard of? I'm aware of the pitfalls of the sharpe ratio when concerning divergent strategies, however I'm curious. I think it would be possible, but one would have to blend it with shorter term pattern recognition and mean reversion strategies.
Last edited by Macro on Wed Sep 05, 2012 2:20 am, edited 1 time in total.
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Where have all the (>1 Sharpe Ratios) gone? As written here in Dec 2009*,
* A fun exercise: see how quickly you can find the original. Google Advanced Search lets you Find Pages With This Exact Phrase.
Original graph from original source in 2009:
http://www.mebanefaber.com/2009/12/03/w ... dium=email
Here are some of the places they've gone
The guy who made the graph knew this. That's why he carefully put the qualifier "Actively Reporting" in the title of the graph. [/size]
- Made tons of money, retired, closed their fund (cf. Monroe Trout)
- Closed fund to new investors, stopped reporting performance to database providers (cf. E. Thorp)
- Never reported performance to database providers in the first place (cf. Renaissance Medallion)
* A fun exercise: see how quickly you can find the original. Google Advanced Search lets you Find Pages With This Exact Phrase.
Original graph from original source in 2009:
http://www.mebanefaber.com/2009/12/03/w ... dium=email
Sluggo,
You offer 3 examples of programs that enjoyed sharpe ratios greater than 1.0, but are not included in the sample used for the chart. I would counter with the suggestion that there are probably hundreds, perhaps thousands of programs that suffered sharpe ratios well below 1.0, perhaps even negative, that are not included in the sample. In other words, despite your observation, the sample is still probably too optimistic.
You offer 3 examples of programs that enjoyed sharpe ratios greater than 1.0, but are not included in the sample used for the chart. I would counter with the suggestion that there are probably hundreds, perhaps thousands of programs that suffered sharpe ratios well below 1.0, perhaps even negative, that are not included in the sample. In other words, despite your observation, the sample is still probably too optimistic.