I have a sheet with the calculations for all of these. Are there any I’m missing? Sharpe Roy’s Safety 1st Treynor Information RAROC ROMAD Sortino M^2 Ex post alpha

bump

I wouldn’t worry about that too much as it seems as if you have covered this section well. Is your ex-post alpha the same as Jensen alpha? I can give you a few more measures of risk-adjusted return (such as Omega) but I don’t think they are covered in the material.

Yes, exp post is the same as jensen’s alpha. They are scattered around the curriculum so I wanted to make sure I knew how to calculate them all and understood them

Bradleyz Wrote: ------------------------------------------------------- > Yes, exp post is the same as jensen’s alpha. They > are scattered around the curriculum so I wanted to > make sure I knew how to calculate them all and > understood them The key is to understand what each measure is appropriate for. For example, Sharpe is used to assess risk-adjusted return of a global portfolio. However, it penalizes upside deviation -> Sortino can be a better measure for fat-tailed distributions (for example, hedge funds that have high kurtosis and negative skewness). Treynor ratio is more appropriate for the stock market, etc (by the way Treynor ratio and Jensen alpha give similar results).

maratikus Wrote: ------------------------------------------------------- > Bradleyz Wrote: > -------------------------------------------------- > ----- > > Yes, exp post is the same as jensen’s alpha. > They > > are scattered around the curriculum so I wanted > to > > make sure I knew how to calculate them all and > > understood them > > The key is to understand what each measure is > appropriate for. For example, Sharpe is used to > assess risk-adjusted return of a global portfolio. > However, it penalizes upside deviation -> Sortino > can be a better measure for fat-tailed > distributions (for example, hedge funds that have > high kurtosis and negative skewness). Treynor > ratio is more appropriate for the stock market, > etc (by the way Treynor ratio and Jensen alpha > give similar results). Great point, Maratikus! Unfortunately, I have memorized the formulas but not understood what each measure is appropriate for (i guess i am still stuck in the L2 mode). Would you mind listing the same for the rest? Thanks.

If you look at the 2009 test there is a good questions using these - #11- you had to say which measure was appropriate, then which manager did better by that measure, and what caused the difference. Some key points are Jensen & Treynor use Beta (systematic risk), Sharpe and M^2 total risk, etc.

recognize all by formula as well except for Jensens alpha. Anyone got the formula off the top of their head they can post?

RAROC - Capital @ Risk is the denominator, used for capital allocation decisions to ensure return > Benchmark RoMAD - Maximum drawdown is denominator, I don’t recall using this but I drawdown leads me to believe it is a measure of hedge fund comparisons. M^2 - Uses the capital market line to compare portfolio return to the market. I think this is used in fixed income

Previous message was Treynor, let me think about Jensen

OK, from Sauce… Jensen is alpha R(port) - (R(f) + B(port)[(R(mkt)-R(f)])= alpha

So basically just Rp - CAPM Thanks SJU, appreciate it.