Display Settings:

Format

Send to:

Choose Destination
See comment in PubMed Commons below
PLoS One. 2009 Nov 25;4(11):e8036. doi: 10.1371/journal.pone.0008036.

A note on trader Sharpe Ratios.

Author information

  • 1Judge Business School, University of Cambridge, Cambridge, United Kingdom. jmc98@cam.ac.uk

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.

PMID:
19946367
[PubMed - indexed for MEDLINE]
PMCID:
PMC2776986
Free PMC Article

Images from this publication.See all images (4)Free text

Figure 1
Figure 2
Figure 3
Figure 4
PubMed Commons home

PubMed Commons

0 comments
How to join PubMed Commons

    Supplemental Content

    Full text links

    Icon for Public Library of Science Icon for PubMed Central
    Loading ...
    Write to the Help Desk