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The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. [1] It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return , while the Sharpe ratio penalizes both upside and downside volatility equally.
The upside-potential ratio is a measure of a return of an investment asset relative to the minimal acceptable return. The measurement allows a firm or individual to choose investments which have had relatively good upside performance, per unit of downside risk .
The following table shows that this ratio is demonstrably superior to the traditional Sharpe ratio as a means for ranking investment results. The table shows risk-adjusted ratios for several major indexes using both Sortino and Sharpe ratios. The data cover the five years 1992-1996 and are based on monthly total returns.
Black–Scholes formula. ... Sortino ratio; Omega ratio; Bias ratio; ... with a focus in Corporate Finance, Valuation and Investments. Updated Data, Excel Spreadsheets.
Roy's ratio is also related to the Sortino ratio, which also uses MAR in the numerator, but uses a different standard deviation (semi/downside deviation) in the denominator. In 1966, William F. Sharpe developed what is now known as the Sharpe ratio. [ 1 ]
More formally, then, since everyone holds the risky assets in identical proportions to each other — namely in the proportions given by the tangency portfolio — in market equilibrium the risky assets' prices, and therefore their expected returns, will adjust so that the ratios in the tangency portfolio are the same as the ratios in which the ...
This list may not reflect recent changes. A. Attack rate; B. Bayes factor; Beta (finance) C. Coefficient of determination; ... Sortino ratio; Standard score ...
Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of considered portfolios, according to some objective.The objective typically maximizes factors such as expected return, and minimizes costs like financial risk, resulting in a multi-objective optimization problem.