标题: Annualized Sharpe Ratio from monthly data [打印本页] 作者: dkishore1 时间: 2011-10-13 00:17 标题: Annualized Sharpe Ratio from monthly data
Anyone know the correct way to compute the annualized Sharpe ratio from historical monthly or quarterly data?
Do you first annualize the components then compute the ratio, or do you compute the ratio on raw data and adjust the final calculation?
Thanks,
Edited 1 time(s). Last edit at Saturday, August 27, 2011 at 01:01PM by Hank Moody.作者: jcfa2011 时间: 2011-10-13 00:23
If returns are normally distributed and iid you basically do either. Convert the monthly return and standard deviations to annual and do the ratio, or do the ratio and multiply by the square root of time.
In practice, returns are neither normal nor iid so technically you shouldn't do that.作者: Iginla2011 时间: 2011-10-13 00:35
Multiply by 12 for log returns, CAGR for arithmetic.
For stdev, you just have to realize that you multiply by 12 for variance, so for standard deviation you multiply by the square root of 12.
Hence if you multiply by 12 on top and divide by the square root of 12 on the bottom, you would adjust the Sharpe ratio by the square root of 12.作者: MarginofSafety 时间: 2011-10-13 00:40
