Completeness Fund

CFA Level III Equities
#1

Answer the following questions in prose (2 mins max.):

Quoting Schweser (p. 23 Book 5):

“Managed futures are usually considered …, but their record has been similar to hedge funds. Over the period …, the dollar weighted index of separately managed accounts (CTADollar) had a return, standard deviation, and Sharpe ratio equal to 10.85%, 9.96% and 0.66, respectively, which is about the same as stocks but with a better Sharpe ratio”

Question: How can CTAs and stocks have the same return and standard deviation, but have a better Sharpe Ratio than stocks?

Thanks and good luck everybody

A.J.

#2

Please look at the table in the text … and I guess it is schweser wording.

Managed Futures CTA$ have Same return (10.85% to 10.96%) when compared to S&P500 (Equities).

But they have a LOWER STD Dev 9.96% to 14.65% – hence Sharpe Ratio of 0.66 > 0.45.

I guess Schweese meant to say “which return is about the same as Stocks but with a better sharpe ratio”.

#3

Thank you!

Apologies, I noted that I posted this question under a totally unrelated topic.