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Abstract

A simple example shows that losing all money is compatible with a very high Sharpe ratio (as computed after losing all money). However, the only way that the Sharpe ratio can be high while losing money is that there is a period inwhich all or almost all money is lost. This note explores the best achievable Sharpe and Sortino ratios for investors who lose money but whose one-period returns are bounded below (or both below and above) by a known constant.
Original languageUndefined/Unknown
Number of pages6
Publication statusPublished - 4 Sept 2011

Keywords

  • Sharpe ratio
  • Sortino ratio
  • optimization

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