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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.
For example, when t is close to the risk-free rate, the Sortino Ratio for T-Bill's will be higher than that for the S&P 500, while the Sharpe ratio remains unchanged. In March 2008, researchers at the Queensland Investment Corporation and Queensland University of Technology showed that for skewed return distributions, the Sortino ratio is ...
The t-statistic will equal the Sharpe Ratio times the square root of T (the number of returns used for the calculation). The ex-post Sharpe ratio uses the same equation as the one above but with realized returns of the asset and benchmark rather than expected returns; see the second example below.
Downside risk was first modeled by Roy (1952), who assumed that an investor's goal was to minimize his/her risk. This mean-semivariance, or downside risk, model is also known as “safety-first” technique, and only looks at the lower standard deviations of expected returns which are the potential losses.
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.
It's flu season right now, and the U.S. is in the midst of a wave that's straining hospitals.But not all influenza is the same. There are some notable differences between flu A and flu B strains.
The Sterling ratio (SR) is a measure of the risk-adjusted return of an investment portfolio.. While multiple definitions of the Sterling ratio exist, it measures return over average drawdown, versus the more commonly used max drawdown.
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