The PortScenSortinoRatioA.xlsx Model

Portfolio Optimization with Sortino Ratio

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The Sortino measure of risk is (E(w) - fr)/(SSD(W))

where SSD is the semi-deviation of portfolio below target.

This is similar to the Sharpe ratio.

The difference between the two ratios is that Sortino's considers only

squared deviation below reference target, rather than standard deviation as in Sharpe.

If the returns distribution is not symmetric, Sortino may be a better measure than Sharpe.

If the returns distribution is symmetric, then Sharpe Ratio may be better.

Keywords:

Portfolio | Scenario | Risk Management | Sortino ratio |