Risk-adjusted returns ratio that does not reward high risk for negative returns
Think of Sharpe ratio, Treynor ratio, or anything where (excess) returns $r$ are divided by something that represents risk, $\sigma$:$$\mathrm{performance} = \frac{r}{\sigma}$$If the returns are...
View ArticleAnswer by Forgottenscience for Risk-adjusted returns ratio that does not...
Yes, you are correct on both terms - it doesn't make much sense, and there exists a well-cited solution by C. Israelsen: "A refinement to the Sharpe ratio and information ratio." Journal of Asset...
View ArticleAnswer by Enrico Schumann for Risk-adjusted returns ratio that does not...
1) In a certain, theoretical sense, it does make sense: suppose two portfolio managers delivered negative returns (-1%, say), and one had a higher volatility ("risk") than the other. Then the high-risk...
View ArticleAnswer by amdopt for Risk-adjusted returns ratio that does not reward high...
Does this make sense? Consider this: You are an investor. You have 2 investments. 1 high risk (hr) and the other low risk (lr). You expect the hr to be volatile and expect the opposite from lr. If the...
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