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The Symmetric Downside-Risk Sharpe Ratio

In: THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE

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  • William T. Ziemba

Abstract

The Sharpe ratio is a very useful measure of investment performance. Because it is based on mean-variance theory, and thus is basically valid only for quadratic preferences or normal distributions, skewed investment returns can lead to misleading conclusions. This is especially true for superior investors with many high returns. Superior investors may use capital growth wagering ideas to implement their strategies, which produces higher growth rates but also higher variability of wealth…

Suggested Citation

  • William T. Ziemba, 2011. "The Symmetric Downside-Risk Sharpe Ratio," World Scientific Book Chapters, in: Leonard C MacLean & Edward O Thorp & William T Ziemba (ed.), THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE, chapter 52, pages 769-784, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814293501_0052
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