Tuesday, September 21, 2010
Negative Sharpe Ratios
When both the portfolio and benchmark have negative returns, we can have negative Sharpe ratios and the results can be counter intuitive. I wrote about this in our newsletter two years ago and have been discussing it ever since, especially in our Fundamentals of Investment Performance class.
Well, this week I'm teaching the class for a client, and we touched on this today. I have rationalized WHY negative Sharpe ratios make sense and will shortly be writing at length on this topic. Consider this more of a "teaser" as to what to see in the near future.