Wednesday, September 21, 2011
Credit Suisse Arb Index Fishy
Credit Suisse has an 'Arbitrage US Index' (CSIARBUS Index), that presumably reflects the return on 10 stat arb strategies. The total return since inception in Jan 2002 is above. It's a Sharpe of about 2.4, Madoff-like. If it's real, everyone should put most of their money in such strategies asap.
I'm rather skeptical of such indices. Where's the infamous August 2007 draw down? The index was first made available on Bloomberg in February 2011, and just this August this index had its worst draw-down ever. I have a feeling it is filled with innumerable back-fill biases, a typical naive backtest quants present all the time, oblivious to their selection biases. I looked on the internet for some kind of description, and found nothing.
The world doesn't need more institutions presenting implausible returns. It sure doesn't help their credibility.