Posted By: vicknick
Wrong Definition of Sharpe Ratio in Zorro? - 05/29/23 06:32
In Zorro performance report, sharpe ratio is defined as "annualized ratio of mean and standard deviation of the bar returns when the system is in the market; Bar returns are bar profits divided by invested or required capital."
However, the actual definition does not depend on the invested capital, meaning if I risk 10% of $1000, or 1% of $10000, my sharpe ratio should be the same. This allows us to able to compare the risk-adjusted return of different strategies. But in Zorro, risking the same amount but with different Capital will result in different Sharpe ratio.
However, the actual definition does not depend on the invested capital, meaning if I risk 10% of $1000, or 1% of $10000, my sharpe ratio should be the same. This allows us to able to compare the risk-adjusted return of different strategies. But in Zorro, risking the same amount but with different Capital will result in different Sharpe ratio.