3 ms·
Isn't sharpe invariant to leverage? If I lever up a position 2x my return doubles as does the volatility (StdDev) of the position. Metrics like alpha are better
by gvhst 6y ago
Isn't sharpe invariant to leverage? If I lever up a position 2x my return doubles as does the volatility (StdDev) of the position. Metrics like alpha are better able to tease out if a portfolio is simply levered to a market factor.
- iav 6y agoYou can’t calculate sharpe for a portfolio that includes private investments (PE or VC). Even if you trust the marks - big if - the returns are reported quarterly or at best monthly, and the marks are often unchanged creating a fake effect of a “zero vol” investment
- smabie 6y agoSharpe is mostly considered invariant to leverage, but it's not strictly true. Volatility drag starts to eat more and more into your returns as you lever up.