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URL:  http://boards.fool.com/sharpe-gsd-is-roughly-equivalent-for-ranking-to-26111199.aspx

Subject:  Re: Optimizing Blends with Sharpe/(GSD^x) Date:  11/18/2007  5:23 PM
Author:  elann Number:  204038 of 250380

Sharpe / GSD is roughly equivalent for ranking to CAGR / GSD squared. This means that GSD isn't just overweighted, it is heavily overweighted. Sticking some example numbers: CAGR = 30, GSD = 20 (20%)

CAGR / GSD squared = 30 / 20 * 20 = 30 / 400

When you are already overweighting GSD by this much vs. CAGR, it stands to reason a change in GSD doesn't effect the ranking result much.


You've got your units wrong. I think it's more like -

CAGR / GSD squared = 1.30 / 1.20 * 1.20 = 1.30 / 1.44

Elan
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