SR-BLITS: Sharpe ratio’s backward-looking improvement as a trading strategy

摘要

A common strategy for a single security or a tradeable asset is to buy-and-hold. Proposed SRBLITS that takes a position based on buy and sell signals which correspond to the maximisation of a backwards-looking Sharpe Ratio (SR) based on past returns. At index T, a new vector of positions, for all indices thus far, is calculated such that the backward-looking SR is maximised. The computation involves only inversion of matrices. Experiments on Geometric Brownian Motion series, NSE, and NASDAQ indices indicate a 30% higher SR, with transaction costs considered.