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What is a good Sharpe ratio?

We have previously written that we like the investment performance summary called the Sharpe ratio (though it does have some limits). What the Sharpe ratio does is: give you a dimensionless score to compare similar investments that may vary both in riskiness and returns without needing to know the investor’s […]

One place not to use the Sharpe ratio

Having worked in finance I am a public fan of the Sharpe ratio. I have written about this here and here. One thing I have often forgotten (driving some bad analyses) is: the Sharpe ratio isn’t appropriate for models of repeated events that already have linked mean and variance (such […]

“Easy” Portfolio Allocation

This is an elementary mathematical finance article. This means if you know some math (linear algebra, differential calculus) you can find a quick solution to a simple finance question. The topic was inspired by a recent article in The American Mathematical Monthly (Volume 117, Number 1 January 2010, pp. 3-26): […]

It is not all the quants’ fault.

There is plenty of blame to go around from the current global financial crisis. But, I would like to point out that it is not “all the quants’ fault.” We are all now, unfortunately, sitting in the middle of a high quality (and extremely expensive) lesson in financial mathematics. I […]