How hard can a Sharpe Ratio be?

I finally got around to calculating a (3-year) sharpe ratio for my systematic alt-risk program.  It's a pretty simple thing to do but I haven't bothered because the discussion sometimes gets clouded depending on whom one listens to.  The nuances are in stuff like annualizing monthly data, deannualizing annual data, agreement on risk free rates, which square roots to use, whether to annualize the ratio or not, etc. etc. Go onto sites like quant.stackexchange.com or quora and one gets an onslaught of opinion from otherwise pretty smart people that have opinions that range from naive and wrong to formal and often correct.  Me? I punted and used a Morningstar definition with some dumbed down assumptions to make it easier for me.    


For the last three years, using a Rf rate of 2% divided by 12 (ok, even that is highly debated -- it's maybe closer to zero during that period, the deannualization is wrong, blah blah blah -- but I don't care because nothing really hangs off of this except ego), and my monthly return data, I come up with:

1.4

actually 1.38 but let's round so I can get the 4.  I did not have the energy to compare to a slew of other alt strategies so I compared to at least: a) SPY as a market/sharpe-neutral "proxy" [1.02],  b) VSCGX a Vanguard 40/60 portfolio that might be a proxy for passive portfolio [.99], c) AQMIX a managed futures MF that has some vague similarities to what I do in terms of momentum and trend following [.11], and d) QLEIX an AQR long/short liquid-alt fund that has nothing to do with me at all [1.92]. So, accretive? yeah, probably...a bit. For now.

I was motivated to estimate because I was reading E. O. Thorp's book A Man for All Markets where he described one of his statistical arbitrage strategies as having a 1.98 Sharpe ratio.  The key difference here, though, other than that he is quite a bit smarter and more successful, is that his return was >18% and he sustained something like that over decades with real clients on the line where I am looking at around 6-7% sustained over a few years without really being tested by the market or by having anyone but me that cares.  But, I'll take what I can get for now and 1.4 is good enough. I probably won't calculate this again because what I really want is asymmetry in risk: more up than down which Sharpe does not capture (a past post on Omega ratio gets closer).