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BUG Fix Sharpe ratio calculation. #219

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merged 1 commit into from
Nov 24, 2015
Merged

BUG Fix Sharpe ratio calculation. #219

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8 changes: 3 additions & 5 deletions pyfolio/tests/test_timeseries.py
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Original file line number Diff line number Diff line change
Expand Up @@ -271,14 +271,12 @@ def test_annual_volatility(self, returns, period, expected):
)

@parameterized.expand([
(simple_rets, 'calendar', 0.8624740045072119),
(simple_rets, 'compound', 1.3297007080039505)
(simple_rets, 1.2333396776895436)
])
def test_sharpe(self, returns, returns_style, expected):
def test_sharpe(self, returns, expected):
self.assertAlmostEqual(
timeseries.sharpe_ratio(
returns,
returns_style=returns_style),
returns),
expected, DECIMAL_PLACES)

@parameterized.expand([
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12 changes: 5 additions & 7 deletions pyfolio/timeseries.py
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Original file line number Diff line number Diff line change
Expand Up @@ -450,7 +450,7 @@ def downside_risk(returns, required_return=0, period=DAILY):
return dside_risk


def sharpe_ratio(returns, returns_style='compound', period=DAILY):
def sharpe_ratio(returns, risk_free=0, period=DAILY):
"""
Determines the Sharpe ratio of a strategy.

Expand All @@ -476,13 +476,11 @@ def sharpe_ratio(returns, returns_style='compound', period=DAILY):
See https://en.wikipedia.org/wiki/Sharpe_ratio for more details.
"""

numer = annual_return(returns, style=returns_style, period=period)
denom = annual_volatility(returns, period=period)
returns_risk_adj = returns - risk_free

if denom > 0.0:
return numer / denom
else:
return np.nan
return np.mean(returns_risk_adj) / \
np.std(returns_risk_adj) * \
np.sqrt(ANNUALIZATION_FACTORS[period])


def stability_of_timeseries(returns):
Expand Down