Incremental Sharpe and other performance ratios
Portfolio Management
2019-01-23 v5 Risk Management
Statistical Finance
Applications
Abstract
We present a new methodology of computing incremental contribution for performance ratios for portfolio like Sharpe, Treynor, Calmar or Sterling ratios. Using Euler's homogeneous function theorem, we are able to decompose these performance ratios as a linear combination of individual modified performance ratios. This allows understanding the drivers of these performance ratios as well as deriving a condition for a new asset to provide incremental performance for the portfolio. We provide various numerical examples of this performance ratio decomposition.
Cite
@article{arxiv.1807.09864,
title = {Incremental Sharpe and other performance ratios},
author = {Eric Benhamou and Beatrice Guez},
journal= {arXiv preprint arXiv:1807.09864},
year = {2019}
}
Comments
18 pages