Greetings misfits, I bid you good evening from the confines of my VIXTITS compound, where the ground is very dry and the humor even drier. I see literally none of you cared to discuss Sharpe ratios in my previous post; it’s almost as if you’re retarded on purpose. Do you not feel like improving upon yourselves, or do you simply want to drift away into the night a loser?
Speaking of which, Donald Trump is encouraging investors to sue ABC News over their fake news report on Friday. As a matter of fact, being that it quite literally induced me to buy more UVXY, I might take him up on his idea — an idea that I had first, might I add.
I WANT ABC NEWS TO REFUND THE STOCK MARKET FOR TODAY'S LOSSES
— The_Real_Fly (@The_Real_Fly) December 2, 2017
People who lost money when the Stock Market went down 350 points based on the False and Dishonest reporting of Brian Ross of @ABC News (he has been suspended), should consider hiring a lawyer and suing ABC for the damages this bad reporting has caused – many millions of dollars!
— Donald J. Trump (@realDonaldTrump) December 3, 2017
What do you think about the President encouraging his people to sue the media for publishing market moving stories? Pretty surreal, no? I get how Trump hates them and equates them to being the anti-christ; but it’s all rather disjointing in a beautiful way. What’s even more amazing, might I add, is how markets don’t seem to be flustered by chaos.
Dow futures are +236. Prepare for a Monday shitstorm of buyers at the open. However, I can almost promise you it will be faded.
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Next shitstorm is Kushner’s indictment.
Next shitstorm is your ass getting deported. Back to Mexico.
Thanks, I like Meheeco.
Pretty sure they all hated Jesus in his time. Funny how that works.
Jesus and his brother Angel did the electrical work in my new house. I never hated Jesus but I did chew him out one time for being late.
Trump ought to get the SEC to investigate if there any out of the ordinary trades just before the reportto determine if they can be tied back to the ABC staff.
You mean like 9/11 airline trades? Good luck with that “investigation”!
Come the fuck on. Sharpe ratios are a joke in hofjuden run and rigged mawkets. What is your common benchmark for comparing two assets that are not assets but debt derivatives? Sharpe ratios are pure academical bullshit since they rely on the input data being correct. And that’s not what one gets in FED rigged mawkets and their doctored “statistics”. You might as well go with the crypto btc pyramid scheme which provides a high Sharpe ratios with a long duration of operation. Regardless, the inputs are false no matter how you slice it. But hey, you might as well go with your “Sharpe rations” and see if you get a nice “bologne sammich” at the end of your sunday drive.
Wrong post. Anyway, you’re right that Sharpe ratios aren’t hard numbers, so you can’t just assume that a higher Sharper ratio means a better buy. You are also correct in that they rely on good input data. In most calculations, the expected return is assumed to be the same as the historic returns. Either that, or the perosn makign the calcualtion has to guess, whcih kind of makes a calcualtion pointless.
However, the Sharpe ratio can be useful to compare similar assets, particularly where the performance is somewhat correlated.
Anyway, what is your preferred method of quantifying risk? Buyign gold and paryign isn’t exactly a stellar plan, either
I think you have Sharpe ratios wrong. You are not expecting any return, but measuring actual returns vs risk free returns divided by standard deviation. It quite literally tells you how insane or normal you are as an investor and should be monitored, in hindsight, in order to make adjustments later.
It can be calculated either way (using historical or expected returns).
If someone didn’t use the historical Sharpe Ratio, then they would be basically making up the data, as I said. On the other hand, if you want to evaluate the risk in your portfolio, **past performance doesn’t matter**. So the only *useful* Sharpe ratio is one that calculates the risk/reward going forward, ie using the expected return and its standard deviation – which are both unknowable.
Hence, just like with everything WallStreet, “Past performance is not indicative of future returns – but we are going to pretend that it is just so that we can calculate something and make pretty graphs to convince you to give us your money”
Sharpe is not supposed to be predictive, but show you how much risk your strategy has. Like it or hate it, there isn’t one large asset manager or person fund that doesn’t use it to gauge managers.
You can’t KNOW how much risk your current portfolio has. You can only **estimate** your current portfolio risk based on assumptions you make. What you are saying is really:
“Sharpe is not supposed to be predictive, but (predicts) how much risk your strategy has (based on the assumption that future volatility and the expected return of your portfolio’s assets will be similar to the past).”
Also I *do* like the Sharpe ratio – in certain situations. I don’t think the Sharpe Ratio is useless, because past *relative* performance *is* correlated with future *relative* performance for related assets. .
However, as Sarc points out, if SR was a true absolute risk measurement, then you would be able to use to compare two wildly different portfolios.
(If you had a scratch-off ticket, then your actual risk and expected return is explicitly defined, so your Sharpe ration would be an absolute risk metric. )
Sharpe ratio is all about optics and yuge assumptions. First, returns in excess of the risk free rate are fictional since the risk free rate are sovereign bonds which as we know are not risk free. In fact, they are very risky. Next, how does Sharpe ratio help (it doesnt) when Sharpe inputs vary wildly among hedge fund strategies, portfolios, and over time? Ie, how do you interpret and how much better is for example Sharpe (-0.4) vs (0.2) of two portfolios with different strategies?
Modigliani RAP is a much better way to asses risk even though still problematic when comparing to some benchmark that is artificially maintained (BTFD). Anyway, it all looks good on paper, no? Just like when everybody has a strategy until they get kicked in their nuts/
Idiotic. Sharpe ratios are simply a measure risk adjusted returns. Quit disagreeing for the sake of disagreeing.
They are of supreme importance for all investors, especially those with a lot of money to invest.
Pearls cast before swine.
If you were to tell people to pursue some increasingly complex formula to better themselves they would do it. Give them an easy measure to evaluate their own alpha and they spit back in your face.
Yet you (a distinguished gentleman) persist in your humanitarian efforts… God bless you for it
In terms of fading the trade: tax reform is not a done deal, but the futures is reacting as if it is. Remember, a bill that just barely passed the Senate is about to be changed, and then it must be voted on again. And I’ve already seen TV ads in my area telling people how bad the bill is and listing Senators that should be contacted to change their vote.
Sortino Ratio a better step in the direction of measuring your portfolios “riskyness”. Sharpe treats upside and downside vol equally. Sortino does not. Besides Rf is distorted when we are in a ZIRP environment, but I guess you have to take it for what it is. The business of the business looks at these numbers regardless.
A lot of high Sharpe and Sortino ratio managers for that matter are simply riding a Rf that is essentially zero. Better off calculating actually upside/downside capture.
Finally someone who knows his stuff.
Sortino is good too, as it Treynor. Heck, they’re all good if you’re analytical and like looking at this stuff. But all of this means nothing if you can’t pick good investments. However, these sort of measures could do a lot of people around here some good. Trust me.
Plus need to look at your mandate in general. Are you absolute return focused or looking to generate alpha? Leveraging beta doesn’t count, which is what a lot of hedgies were doing “back in the day” to garner a 2/20.
Max DD and TTR are also metrics that should be used.
Most of this stuff is for institution type investing as most clients don’t care. Retail is relative return to the upside and absolute when the market hits the skids.