Question #1
Reading: Reading 34 Hedge Fund Strategies
PDF File: Reading 34 Hedge Fund Strategies.pdf
Page: 1
Status: Unattempted
Correct Answer: A
Question
Compared to the Sharpe ratio, the Sortino ratio may be preferred when comparing hedge funds due to which of the following?
Answer Choices:
A. The high volatility of hedge funds
B. The right-tail risk of hedge funds
C. The left-tail risk of hedge funds
Explanation
Due to the left-tail risk of hedge funds, the Sortino ratio may be superior in defining risk
since it only considers downside deviation. Both measures would reflect high volatility
through their risk measures.