The Sharpe ratio was introduced half a century ago and it’s still going strong. Although the world is now awash with competitors, the granddaddy of quantitative risk metrics endures. Its longevity and widespread use drives some analysts batty, but for good or ill the SR is deeply embedded into the fabric of risk management discussions and analytics. Part of its appeal is its simplicity, but that can also be a source for abuse. Complexity doesn’t have a monopoly on misguided applications when it comes to risk analysis.
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