Understanding the Sharpe Ratio

Test your knowledge of the Sharpe ratio, a key metric used by quantitative traders on Wall Street.

Business mixed 8 Questions Video Quiz
Progress 0 / 8
Q1 Beginner 1 pts

What is the primary purpose of the Sharpe ratio? Video Reference:
"The Sharpe ratio is a risk adjusted measure of performance...."

Timestamp: 1:00

Q2 Beginner 1 pts

True or false: The Sharpe ratio is calculated by dividing the average daily returns by the standard deviation of returns. Video Reference:
"The Sharpe ratio can be calculated pretty simply by taking your average daily returns putting that i..."

Timestamp: 2:00

Q3 Intermediate 2 pts

Which of the following are reasons why the 'wiggles' or volatility in an investment's returns are considered bad? Video Reference:
"The first reason The Wiggles are bad is that it makes black a lot more painful to hold sure sometime..."

Timestamp: 1:30

Select all correct answers
Q4 Intermediate 2 pts

What is the purpose of diversifying a portfolio according to the video? Video Reference:
"if we combine the two Investments couldn't we cancel The Wiggles reduce risk and obtain a higher sha..."

Timestamp: 3:00

Q5 Advanced 3 pts

True or false: A Sharpe ratio of 20 represents a near-perfect arbitrage opportunity. Video Reference:
"a 20 sharp would be extremely difficult to capture at scale and represents a near perfect Arbitrage..."

Timestamp: 2:30

Q6 Advanced 3 pts

Which of the following are typical Sharpe ratios for good investments? Video Reference:
"the trailing 20-year sharp of the S&P 500 as measured by spy an ETF that tracks the S&P 500 is aroun..."

Timestamp: 2:40

Select all correct answers
Q7 Advanced 3 pts

What is the key factor that allows a 50/50 portfolio of two equal-Sharpe investments to have a higher Sharpe ratio than either individual investment? Video Reference:
"when red zigs blue zags and vice versa in other words their Wiggles are opposite they are negatively..."

Timestamp: 3:00

Q8 Intermediate 2 pts

Which of the following is NOT a key topic in quant research and trading that the Sharpe ratio helps to illustrate? Video Reference:
"by trying to talk about the sharp ratio just trying to even introduce it we'll be forced to touch on..."

Timestamp: 0:30

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