Not correct answer?

AI & Machine learning
1

Course Name: Sharpe Ratio, Section No: 1, Unit No: 9, Unit type: Quiz

the answer says: both A & B with explanation (

Correct. Since both strategies have the same Sharpe ratio, we should invest in both.

) but, the machine learning strategy has a lower standard deviation, which implies lower risk, if i have the same Sharpe ratio, wouldn't it be better to haver lower risk as well?

 

2

Hi Sebastian,



The Sharpe ratio considers both returns and risk. Thus, if you were to invest according to the Sharpe ratio of the strategy alone, you can consider both. However, different individuals have different risk apettites, and if you are giving more preference to the risk measure, then you would pick strategy B.



I hope this helps.