Hey guys, what are the risks in using Std. Dev. in the Sharpe Ratio for Hedge Funds?
Hedge fund returns, particularly those using derivatives, aren’t normally distributed.
I guess to hedge that risk you can wrap it up. Wrap up normally distributed risk-management techniques when analyzing non-normally distributed returns, that is.
well she looked safe… better to use the sortino ratio (ERP-MAR)/Downside Dev accounts for optionality( non normal distribution) although i dont fully understand how
You can game the Sharpe ratio by lengthening STD term.
Risks are pretty much how managers can game them: C - Compounding L - Lengthening O - Option Writing S - I forget - Smoothing (I remembered) E - Eliminating Outliers
cook , you hot