Losing money with a high Sharpe ratio
Risk Management
2011-09-06 v1
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 in which 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.
Cite
@article{arxiv.1109.0706,
title = {Losing money with a high Sharpe ratio},
author = {Vladimir Vovk},
journal= {arXiv preprint arXiv:1109.0706},
year = {2011}
}
Comments
6 pages