what is this formula…can someone explain?
(Sharpe ratio of exiting portfolio) X (correlation of Bonds with existing portfolio)作者: Unforseen 时间: 2013-4-8 21:59
theyre basically trying to figure out if adding a new investment class (bonds in your case) to the existing portfolio will add value. you’re forgetting the first part of that equation which goes:
IF - sharpe of new (sharpe of existing) * ( correlation of new asset class with existing) - THEN ADD THE NEW.
This will increase the overall sharpe of the existing portfolio making it optimal.作者: PalacioHill 时间: 2013-4-8 21:59
