Roys SF vs Sortino

What’s the difference, is it just that sortino uses downside deviation?

close…two main differences. Roy’s doesn’t use Rf they use the minimal acceptable return. Sor uses Rf. Roy’s ueses deviation of the portfolio whereas Sor uses downside deviation.

CFAI Reading 37, Page 62: Sortino ratio = (Mean Portfolio Return - MAR)/Downside deviation MAR = Minimum Acceptable Return

my mistake. Thanks CFAA.

How does one calculate Downside deviation ?

Downside deviation: Define deviation as (ith return - MAR). Ignore positive terms. For negative terms, sum deviation^2 Divide by n, where n is number of returns Take square root.

much appreciated, couldnt find it in Schweser…

I don’t think they will ask for the calculation or anything more than why Sortino ratio may be useful and its limitations.

:smiley: even better

So is minimum acceptable return and MAR the same thing?


CFAI Reading 34, Page 336: Sortino ratio = (Annualized rate of return - Annualized risk-free rate) / Downside deviation so, strikershank was correct as well I think Sortino ratio could be calculated both ways, i.e. MAR could be set to risk-free rate, but the main difference from Sharpe ratio that Sortino ratio uses downside deviation, where Sharpe ratio uses standard deviation

Volkovv, that is correct the only “real” difference is the denominator of the equations. For Sharpe its STd DEv and for Sortino its Downside Deviation


Roys: Er - Rmin/Standard deviation Sortino: Er - Rfr/downside deviation

Jimmy you’re late to teh party…the keg is kicked.


I’m drinking from my hip flask…