标题: Sharpe ratio [打印本页] 作者: pawn 时间: 2011-7-13 16:09 标题: Sharpe ratio
Hi, all
2008 Q3 PartA (i)
If you combine two portfolio(A and B), its Sharpe ratio is calculate weighted average of A and B?
Is this calculation only approximation or theoretically accurate?
Thanks in advance.作者: bpdulog 时间: 2011-7-13 16:09
its return is calculated weighted average of A and B,
but its deviation is not
so Sharpe ration of averaged weight is only approximation作者: PalacioHill 时间: 2011-7-13 16:09
Without going into that question, I will think it is only approximation.
Theoratically, when we combine 2 assets (or portfolios in this case), for any correlation not equal to 1, there are going to be diversification benefits. meaning the combined risk would fall and sharpe ratio would go up.
Does it mention/hint anywhere in the question that there is 0 correlation between these portfolios? In that case, when correlation is 0, Sharpe Ratio of the combination could be weighted average of A and B.
Just the way I am thinking..作者: former 时间: 2011-7-13 16:09
Approximation.作者: thommo77 时间: 2011-7-13 16:09
Thank you !!作者: bodhisattva 时间: 2011-7-13 16:09
I'm thinking you meant correlation would have to be 1.0 for the Sharpe ratio of the portfolio to be the weighted avg. of the Sharpe ratio of the assets. Anything less than 1.0 would bring diversification benefits, raising the Sharpe ratio above the weighted avg.作者: canadiananalyst 时间: 2011-7-13 16:09
Thanks gjertsen for the correction. Correlation should have been 1 and not 0 in my post, for weighted avg to be used.
