bulosehi

I agree with Fin,
If portfolio is well diversified, there will be nearly no difference before and after you add one more stock.
so Treynor is same, Sharpe is same
IR also same and nearly 0

smuggycfa

Here’s a disturbing counter point for the schweez:
consider the Singer-Terhaar approach for defining the risk premium of an asset class in integrated markets
RP(ac) = Std Dev(ac) * Corr(ac,GIM) * [RP(GIM) / Std Dev(GIM)]
where RP = Risk Premium or R - Rf; and GIM = Global Investable Market
rearranging this formula and expanding we have:
[R(ac) - Rf] / Std Dev(ac) = [R(GIM) - Rf] / Std Dev(GIM) * Corr(ac,GIM)
or rather Sharpe(ac) = Sharpe(GIM) * Corr(ac,GIM)
Now the GIM is certainly a diversified portfolio so why can we use the sharpe ratio in this situation? By Schweser’s rationale the ratio used should have been the Treynor ratio.
If I am wrong someone please explain it to me, but I think Schweser may have taken to many assumptions in thier conclusion to this answer.

segalm

Crucifier, this question is nasty broski. Where you get it?

mamuka12

So what’s the consensus here Crucifier?