A higher ratio is considered better. It indicates a higher return or a moderate degree of risk, or both. In any case, it suggests that the investor got a substantial reward for taking a greater risk. A negative ratio means that the investment underperformed the risk-free alternative when the...
This makes it particularly useful in areas like finance, where it can assess the risk-to-reward ratio of different investment portfolios. Similarly, in quality control, the CV can help compare the consistency of production processes that use different measurement scales. Let’s take a deeper look...
Many a time a manager may appear expert on a reward-to-systematic-risk basis but unskilled on a reward-to-total-risk basis. An investor comparing the Treynor ratio and the Sharpe ratio of a fund has to understand that a major difference between the two can actually be indicative of a por...
Variance helps the investors and analysts determine standard deviation, which allows find an investment’s risk and reward ratio orSharpe ratio. Anyone can earn a risk-free rate of return by investing in Treasury and risk-free securities. But return over and above this is the excess return, an...
However, when the season is on and demand is strong, the high daily rates will allow you to more than compensate for the slow season. So, the high risk of prolonged vacancy leads to high potential reward in terms of strong cap rate. ...
What is the Treynor ratio if the expected risk-free rate is 3.9 percent? You manage a portfolio with an expected return of 18% and expected standard deviation of 28%. The T-bill rate is 8%. Calculate the portfolio's reward to...
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