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Subject:  Re: Optimizing Blends with Sharpe/(GSD^x) Date:  11/18/2007  8:08 PM
Author:  emintz Number:  204045 of 264139

I think you have made a compelling case that Sharpe/GSD is more predictive of future Sharpe than Sharpe. The additional data that you have posted since your initial post in the thread have helped confirm this in my mind.

I still think there is a limitation here - it may work well for screens only. My observation is that Sharpe/GSD does not produce blends that are all that different from Sharpe - it just picks ones that have lower GSDs (and lower CAGRs). If you blend with other asset classes, such as bond ETFs, you may find that Sharpe/GSD optimizations may put you almost entirely in bonds all the time.

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