Traders Sharpe Ratio
Hi, I am very confused about the Sharpe ratio with respect to Traders. How is a Sharpe Ratio calculated for traders? Often I have seen in many Trading job posting, it would say to write down Sharpe ratio on resume. Why is that significant? And what do you compare it to, for example, let’s say Trader A has a Sharpe ratio of X, how would I know if that is below or above average? What is a good Sharpe ratio? I have copied the following job description from a online job ad, “Candidates must have experience with Equities, Futures or Currencies as well as high Sharpe Ratios” What do they mean by high Sharpe ratio and how would a trader calculate it?
Thank You,
http://lmgtfy.com/?q=sharpe+ratio
as for comparing part, the same ad had mentioned stds of 3 for equities and 2 for futures and currencies
Sharpe Ratio
Differential returns of the Fund to risk free rate / The standard deviation of those returns
It depends on the strategy the trader is using. That particular job is for high frequency trading and this strategy requires high Sharpe ratios. However, Louis Moore Bacon and Paul Tudor Jones, two of the greatest macro risk managers ever have Sharpe ratios of 1.23 and 0.86 respectively on their flagship funds.
Source: http://www.offshore-rebates.com/pdf/aurum/Aurum_Brochures_July_08.pdf
Performance measurement using Sharpe Ratios is a tricky issue. If they know what they are talking about, then in the end it matters what index they are measuring against, and what the risk free rate they are using is.
For example, that attachment by PTJ uses Risk-free as 5%, which we know nowadays is not possible. Use the 3 month to 1 year treasury yields as the risk free rate, of which the 3 month is 0.18 yield.
To put it into perspective, I was approached by Hedge Fund recruiters for the NY area that preferred Sharpe's above 5. The Sharpe at the fund I am now at is a Sharpe of 20.8.
What type of hedge funds are these? Good points btw.
A 20.8 Sharpe ratio huh? So your fund could offer returns between 90-110% with 95% certainty?
Quantitative hedge funds that use algorithmic trading as a portion of their strategies. Right now I am at a Long/Short Cleantech Equity hedge fund.
"95% Certainty?" I am an investment professional, not a used car dealer.
Studying for Series 65 right now.
Verbiage aside, you're clearly an idiot.
Certainty? Since you're using that word, my guess is you aren't even in the industry. You've never professionally managed money, and you may have an awesome $500 TD Ameritrade account, but you will never be Anything more.
Looking at all your posts, here is what I see: "That was very stupid." http://www.wallstreetoasis.com/forums/market-crash "And c'mon - slaying Jappy Murray Hill chicks gets old after your first year. Please tell me you're not in your "TFA/Americorps chick" phase now." http://www.wallstreetoasis.com/forums/livingworking-in-stamford "They are all nerds, they all travel the same, hours are basically the same, exit opps are basically the same." http://www.wallstreetoasis.com/forums/differentiating-mbb
So hmmm, you're a pissed off little ass who hates everything. That almost surprises me, since all you care about is kicking around online. I have better things to do than care about what you have to think. Loser.
Uh, no - you're clearly the one who isn't in the industry if you're going on about your 20.8 Sharpe ratio. I do work in the industry, but I'm not going to get into a dick wagging contest with you.
Every few months, another shitdick comes and talks some bullshit based off his internship at some small shop in Colorado or something his finance professor told him while he was jerking off to his CAPM model - I suppose it keeps the site marginally entertaining.
worldstaaaaaaaaar
sharpe ratioooooooooooo
...the sharpe rartio is a really flawed statistic, as it selects for managers who are usually short-vol. The type of guys that usually have big Sharpes are quant shops like LTCM or Goldman Global Alpha whose strategies were really no different then selling out of the money options over and over again. For example, if one simply levered up and sold way out of the money puts on S&P's they would run up a huge sharpe ratio as they racked up steady/non-volatile returns until of course something went wrong and they finnally got stung and blew up. This is why "long vol" traders who actually make value-added bets on markets often have not-so-great Sharpes. I'll take Louis Bacon or Paul Tudor Jones with sharpes around 1 any day of the week over some quant shop running a black box with a higher sharpe...the black box is probably an accident waiting to happen...a bomb that has just yet to detonate. A lack of vol in the past, even for years in the past, does not indicate a lack of vol in the future.
BTW a sharpe of over 20 is ridiculous. Please re-check your math. No further comment on that.
....just re-read the thread in full...
cap and trade currently works at a quantitative long/short clean-tech fund ....u see people, THAT is why i cant seem to quit this board, u just cant make stuff like that up!
Bondarb, stop being such a cynical asshole. I mean seriously, what quantitative long/short clean-tech fund ISN'T > 20 sharpe ratio these days?
Check this post out This posts explains this topic well Search "MarketXLS Calculate Sharpe Ratio of Portfolio in Excel" Can't post link here so you can search it manually. :)
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