bet's friends

[goforthebet]

I wish everybody a great sunday

I hope you enjoy reading this

my 2 posts which have been deleted after 30 seconds on the B-board and an answer to both :

Key Concepts for NAFF Members (A continuing education series…)

This week: Sharpe Vs Shortino Ratios


What is the best way to quantify an investment's risk? There is more than one answer to this question, and the Sharpe and Shortino Ratios reflect two distinct schools of thought.

One of the most commonly used measurements of risk is variance, the dispersion of an investment's returns from their mean. In the calculation of this value, no distinction is made between upside and downside deviation. For this reason, an investment with monthly returns of -5% and +5% will have the same variance as another investment that is flat one month and +10% the next.

The formula for the Sharpe Ratio is return minus the risk free rate divided by standard deviation. It is important to note that standard deviation is simply the square root of variance. In accordance with the description above, the Sharpe Ratio is therefore using a non directionally-biased measurement of volatility to adjust for risk. This concept has been criticized, as it may actually punish a fund for a month of exceptionally high performance. For many individuals, this type of deviation is not only acceptable, but also desirable. It is for this reason that the Shortino Ratio was developed.

Instead of using standard deviation in the denominator, the Shortino Ratio uses downside borrowless semi-variance. This is a means of cloaking the excess returns due to naked shorting of low-quality equities above a standardized rate. By utilizing this value, the Shortino Ratio is reducing the "perceived" return, reportable to clients and other parties with a perceived interest, such as regulators. It is a measurement of normalized upside return per unit of quasi-riskless downside investment.

Although there are arguments in favor of both ratios, the use of the Sharpe has been more mainstream. In some cases, this may reflect a certain comfort level associated with its use of standard deviation, which is a more traditional measurement of volatility. Funds that cite their Shortino Ratio have traditionally been those with the least tolerance for traditional trading strategies. In these cases, the Shortino may be presented as a compliment to an investment thesis that includes the above average returns that are the guaranteed consequence of so-called naked short selling.

http://www.freedomfunds.net/concepts.html

and

Other NAFF objectives include:


providing a forum for information-sharing among our membership about pricing anomalies in the speculative equity markets

providing resources and services for our members on a pay-as-you-go basis, where such resources may expensive to engage permanently (such as telephone equipment, trained operators, message board opinion leaders, etc.)

increasing the participation by the general investing public in unregulated investments such as freedom funds
continuing the industry's status as a self-regulatory organization

enabling legislators to take a detached, global perspective on issues of concern to our members, through a generous program of educational foreign travel

lobbying legislators and regulators around the world, to ensure that our members continue to enjoy the freedom to take downward-anticipatory trading positions in mis-priced and over-valued equities, without the onerous administrative and technical burdens of finding shares to borrow, or being subject to invasive disclosure about such activities.

http://www.freedomfunds.net/mission.html



Posted by: alj14
Date: Sunday, July 27, 2008 5:18:30 PM
In reply to: A deleted message Post # of 16059

You have come across some illuminating quotes there, GoForTheBet: how about "on a pay-as-you-go basis"?

Anthropologically, it's not only share volumes that deserve attention, but volumes of posts finding their way to single boards (as acknowledged by the rankings on the IHub home page).

I am keen to see how the SP performs tomorrow and, most of all, whether we will be seeing a PR hitting the wires some time this week.

One way or another, it looks as if we are due for an eventful week!

alj