A note on traders Sharpe ratio

Coates, J.M. and Page, L. 2009. A note on traders Sharpe ratio. PLoS ONE. 4 (11), p. e8036.

TitleA note on traders Sharpe ratio
AuthorsCoates, J.M. and Page, L.
Abstract

Traders in the financial world are assessed by the amount of money they make and, increasingly, by the amount of money they make per unit of risk taken, a measure known as the Sharpe Ratio. Little is known about the average Sharpe Ratio among traders, but the Efficient Market Hypothesis suggests that traders, like asset managers, should not outperform the broad market. Here we report the findings of a study conducted in the City of London which shows that a population of experienced traders attain Sharpe Ratios significantly higher than the broad market. To explain this anomaly we examine a surrogate marker of prenatal androgen exposure, the second-to-fourth finger length ratio (2D:4D), which has previously been identified as predicting a trader's long term profitability. We find that it predicts the amount of risk taken by traders but not their Sharpe Ratios. We do, however, find that the traders' Sharpe Ratios increase markedly with the number of years they have traded, a result suggesting that learning plays a role in increasing the returns of traders. Our findings present anomalous data for the Efficient Markets Hypothesis.

JournalPLoS ONE
Journal citation4 (11), p. e8036
ISSN1932-6203
YearNov 2009
PublisherPublic Library of Science
Digital Object Identifier (DOI)doi:10.1371/journal.pone.0008036
Publication dates
PublishedNov 2009

Related outputs

The effect of employment while in high school on educational attainment: a conditional difference-in-differences approach
Buscha, F., Maurel, A., Page, L. and Speckesser, S. 2012. The effect of employment while in high school on educational attainment: a conditional difference-in-differences approach. Oxford Bulletin of Economics and Statistics. 74 (3), pp. 380-396.

Alone against the crowd: Individual differences in referees’ ability to cope under pressure
Page, K. and Page, L. 2010. Alone against the crowd: Individual differences in referees’ ability to cope under pressure. Journal of Economic Psychology. 31 (2), pp. 192-199.

Last shall be first: A field study of biases in sequential performance evaluation on the Idol series
Page, L. and Page, K. 2010. Last shall be first: A field study of biases in sequential performance evaluation on the Idol series. Journal of Economic Behavior & Organization. 73 (2), pp. 186-198.

Stakes and motivation in tournaments: playing when there is nothing to play for but pride
Page, L. and Page, K. 2009. Stakes and motivation in tournaments: playing when there is nothing to play for but pride. Economic Analysis and Policy. 39 (3), pp. 455-464.

Is there an optimistic bias on betting markets?
Page, L. 2009. Is there an optimistic bias on betting markets? Economics Letters. 102 (2), pp. 70-72.

Evaluating the use of judicial mediation in employment tribunals: processes, outcomes and costs
Urwin, P.J., Chevalier, P.A., Karuk, V., Latreille, P., Michielsens, E., Page, L., Siara, B., Speckesser, S. and Boon, A. 2009. Evaluating the use of judicial mediation in employment tribunals: processes, outcomes and costs. Commissioned by the Ministry of Justice.

The role of aspiration levels in educational choices: an economic foundation
Levy-Garboua, L. and Page, L. 2009. The role of aspiration levels in educational choices: an economic foundation. in: Cherkaoui, M. and Hamilton, P. (ed.) Raymond Boudon: a life in sociology: essays in honour of Raymond Boudon Bardwell Press.

Who studies abroad? Evidence from France and Italy
Di Pietro, G. and Page, L. 2008. Who studies abroad? Evidence from France and Italy. European Journal of Education: research, development and policies. 43 (3), pp. 389-398.

Aspiration levels and educational choices: an experimental study
Page, L., Levy-Garboua, L. and Montmarquette, C. 2007. Aspiration levels and educational choices: an experimental study. Economics of Education Review. 26 (6), pp. 747-757.

The second leg home advantage. Evidence from European football cups competitions
Page, L. and Page, K. 2007. The second leg home advantage. Evidence from European football cups competitions. Journal of Sports Sciences. 25 (14), pp. 1547-1556.

Des inégalités sociales aux inégalités scolaires: choix éducatifs et prospect theory
Page, L. 2005. Des inégalités sociales aux inégalités scolaires: choix éducatifs et prospect theory. in: Revue Economique, volume 56(3) Paris, France Les Presses de Sciences. pp. 615-623

Permalink - https://westminsterresearch.westminster.ac.uk/item/90900/a-note-on-traders-sharpe-ratio


Share this
Tweet
Email