Interesting Sharpe Ratio statement

[BaseballRedhawks]

from video:
Sharpe ratio is telling you the number of standard deviations the expected return is from the risk-free rate.
The greater the number of standard deviations you are from that risk free the lower the probability you will have a return as low as the RF rate.
Literal definition of what Sharpe ratio is calculating.
Had no idea till i heard this. i just knew we wanted a high sharpe ratio.

 

[S2000magician]

Whose video?

 

[igor555]

so youre telling me if std dev increases sharpe will fall? no way

 

[S2000magician]

igor555 wrote:so youre telling me if std dev increases sharpe will fall? no way

That’s not remotely what he’s telling you.

 

[igor555]

enlighten me s2k

 

[S2000magician]

I have no idea why I wrote that.
Blame Mingus: one of the kittens my wife bought.
Yes, if the standard deviation of returns increases (with the mean return and the risk-free rate remaining unchanged), the Sharpe ratio decreases. What’s surprising about that?

 

[BaseballRedhawks]

Schweser cfa level 3 video by….crap forgot the name. great instructor.

 

[S2000magician]

David Hetherington?
Marc Lefevre?
Greg Filbeck?

 

[MGR250]

Hetherington is a beast!!!

 

[S2000magician]

I’ve had the pleasure of working with David Hetherington at Stalla and at Schweser; he’s an excellent instructor.

 

[BaseballRedhawks]

yup - david heterington!

 

[Galli]

igor555 wrote:
so youre telling me if std dev increases sharpe will fall? no way

I think it’s more so saying by increasing risk you’re more likely to earn a return in excess of the risk-free rate.
Dispersion around the Rf is higher as you increase risk (standard deviation)