Sortino Ratio

CFA Level I
#1

Can someone help me in calculating Sortino? From what I understand, it is the: (Average Return - Rf)/downside semi stdev I’m having some trouble with it in excel. The returns I’m working with are monthly returns on a FoF, and the risk free rate is 5%. Any help or direction would be much appreciated. Thanks!

#2

the whosey whatsey?

#3

wake2000 Wrote: ------------------------------------------------------- > the whosey whatsey? +1

#4

whats sortino?

#5

this is out of curiculum…

#6

Haven’t seen this on any LOS…

#7

You do not need to know this for the exam. All you need to memorize is the Sharpe and Roy’s SF.

#8

…and how to cook Sortino pasta

#9

any ideas about Treynor’s measure, Jensen’s Alpha or R^2?

#10

I think sortino ratio is not part of the level 1 curriculum unless it has changed for 2008. Sortino ratio is generally tested in the level 2 exam Treynor Ratio: also called reward-to-volatility ratio. This is excess return over risk-free rate divided by beta (systematic risk). The only difference between this and the sharpe ratio is that sharpe divides Rp-Rf by total risk or standard deviation and treynor divides the same by Beta. When I gave my level 1 exam, there was a question about sharpe and treynor. Had to calculate both, so its good if you can differentiate the reasoning behind the formula as well. http://cfaexamblog.blogspot.com/

#11

Yeah agreed, Sharpe and Treynor are the ones to know.

#12

Northeastern Student Wrote: ------------------------------------------------------- > any ideas about Treynor’s measure, Jensen’s Alpha > or R^2? Always good to know, but as they are not listed in the curriculum, could they test us on them in this years exam?

#13

wat problem are you facing. it is simple return-rfr/downside deviation(i.e only months with negative returns). that makes sortino>sharp