Answer 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...
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 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 ArticleRisk-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...
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