Sharpe Ratio

Mar 30, 2018

A Sharper Sharpe: Just Shrink it!

Note: This blog post previously analyzed Damien Challet's 'Sharper estimator' of the Signal-Noise Ratio. Following up on some suspicions, we compared the drawdown estimator to a shrunk version of the moment-based estimator, and found them to have similar performance. However, the analysis used version 1.1 of the sharpeRratio, written by Challet. That version of the package contained a bug which severely biased the estimator, causing illusory improvements in the achieved standard error. Challet has fixed the package, which is now at version 1.2 (or later), and thus the analysis that was here can no longer be reproduced. We will perform an investigation of the fixed drawdown estimator, and link to it here.

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The above references an opinion and is for information purposes only. It is not offered as investment advice.