The total duration of drawdowns is shown to provide an moment-free, unbiased, efficient and robust estimator of Sharpe ratios both for Gaussian and heavy-tailed price returns. We then use this quantity to infer an analytic expression of the the bias of moment-based Sharpe ratio estimators and the tail exponent of the distribution of heavy-tailed price returns . The heterogeneity of tail exponents at any given time among assets implies that our new methods yields significantly different asset rankings than  moment-based methods, especially in periods large volatility. This is fully confirmed by using 20 years of historical data on 3449 liquid US equities.
The total duration of drawdowns is shown to provide a moment-free, unbiased, efficient and robust estimator of Sharpe ratios both for Gaussian and heavy-tailed price returns. We then use this quantity to infer an analytic expression of the bias of moment-based Sharpe ratio estimators as a function of the return distribution tail exponent . The heterogeneity of tail exponents at any given time among assets implies that our new method yields significantly different asset rankings than those of moment-based methods, especially in periods large volatility. This is fully confirmed by using 20 years of historical data on 3449 liquid US equities.
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