Modified Sharpe Ratio

What Does Modified Sharpe Ratio Mean?
A ratio used to calculate the risk-adjusted performance of an asset or a business strategy. The modified Sharpe ratio is a version of the original Sharpe ratio amended to include skewed/abnormal data. It is calculated by dividing the excess returns by the modified value at risk.

Investopedia explains Modified Sharpe Ratio
A higher return for a given level of risk can be expected from the investment with the higher modified Sharpe ratio. An investment may appear to yield higher returns, making it more desirable; however, the investment may be unstable and simply reflecting a high-risk result. The ratio is useful because many volatile investment vehicles are not normally distributed.

Related Terms

Risk-Adjusted Return
Risk-Free Rate Of Return
Risk-Return Tradeoff
Sharpe Ratio
Value At Risk - VAR
Volatility
More Related Terms

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