The Omega Ratio - A Better Investment Performance Benchmark

 Investors typically use con benchmarks later than the Sharpe Ratio or the Sortino Ratio to rank mutual funds, ETFs, and index trackers. However, these common accomplish benchmarks have several drawbacks and can often be intensely misleading. The Omega Ratio addresses these shortcomings and delivers a in the isolate afield more well ahead method of ranking investments.

The Sharpe Ratio originated in the 1960s and is assumed state the reward-to-risk ratio. It's the lively compensation of a fund separated by its all right aberration, and its primary advantage is that it is widely precision in fund data sheets. The customary irregularity is employed by the Sharpe Ratio as a proxy for risk. However, this is misleading for several each and every one important reasons.

Firstly, permissible aberration assumes that investment returns are normally distributed. In new words, the returns have the eternal torment-hardship. For many investment vehicles, this is not necessarily the court every second. Hedge funds and added investments often display skew and kurtosis in their returns. Skew and kurtosis are mathematical terms that indicate wider (or narrower) or taller (or shorter) distributions than that typical of a delightful distribution.

Hedge fund ranking

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