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the site valuengine.com let you see on the valuation stock comparison
page the sharpe ratio for each stock and its rank vs. its sector
and index.
tv
Bob Fulks wrote:
>
> I went to the MorningStar website and did a search for mutual funds
> with a Sharpe Ratio of greater than a given value. I found the
> results interesting:
>
> Sharpe Ratio No. of Funds
>
> >= + 3.0 1 (A short-term Bond Fund with 6.9% return)
> >= + 2.5 3
> >= + 2.0 5
> >= + 1.9 5
> >= + 1.8 5
> >= + 1.7 6
> >= + 1.6 8
> >= + 1.5 10 (Most of these are Bond Funds)
> >= + 1.4 16
> >= + 1.3 36
> >= + 1.2 81
> >= + 1.1 169
> >= + 1.0 375
> >= + 0.9 744
>
> >= + 0.87 873 (The Vanguard 500 Index fund value)
>
> >= + 0.8 1212
>
> >= + 0.0 4786 (Funds below this level made less than
> T_Bills)
>
> >= - 1.0 8298
> >= - 2.0 8501
> >= -10.0 8538 (I assume Sharpe Ratio is not available
> for all others)
>
> All Funds 11963
>
> So out of probably 8538 funds for which Sharpe Ratio data is calculated:
>
> > About 4% of all funds had a Sharpe Ratio >= 1.0
>
> > About 10% of all funds had a Sharpe Ratio >= the largest S&P Index
> fund.
>
> > About 44% of all funds made a lower return than T-Bills
>
> Frequently asked questions about the Sharpe Ratio:
>
> Q: Is it fair to compare the Sharpe Ratio of a trading system with
> the Sharpe Ratio of a mutual fund?
>
> A: Yes in that it measures the smoothness of the equity curve in both
> cases. But a trading system requires a lot more effort than does
> buy/hold of a mutual fund so the Sharpe Ratio of the trading system
> should be higher to compensate us for the extra effort.
>
> Q: Does the Sharpe Ratio depend upon how many contracts I trade?
>
> A: No. If you trade one contract you make X excess profit (excess
> over the T-Bill rate) with Y standard deviation. If you trade two
> contracts, the excess return would be 2X and the standard deviation
> would be 2Y but the Sharpe Ratio would be the same. This is true for
> reasonable values of leverage. If you increase the number of
> contracts to where you start worrying about margin calls and increase
> the number of contracts as your account increases (as in
> "fixed-fractional"), you might get into a region where Sharpe Ratio
> and then even profits begin to decrease with increasing the number of
> contracts. (This is the same effect that causes the Optimal F effect)
>
> Q: If I buy stocks or mutual funds on margin is the Sharpe Ratio
> affected?
>
> A: No. Assuming a positive return, using leverage, the annual return
> would increase as would the standard deviation of returns but the
> Sharp Ratio would remain the same.
>
> Q: Is it fair to compare the annual return of a trading system with
> the annual return of buy/hold.
>
> A: No. Comparing annual returns without also comparing the
> variability (standard deviation) of returns is meaningless. You can
> arbitrarily increase returns by simply increasing leverage (the
> number of contracts traded). The Sharpe Ratio gives a measure of the
> return normalized by the variability.
>
> Bob Fulks
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