Sterling ratio

The sterling ratio is an ex-post measure of the risk-return ratio of a mutual fund. It shows the ratio of the return to the average maximum loss in value minus ten percent:

${\displaystyle STR={\frac {\overline {R}}{{\overline {\max \left({\text{Verlust}}\right)}}-10\,\%}}}$

Usually the data of the past 36 months are used for this. The measure developed from the criticism of the Sharpe quotient that volatility as a risk measure weights price swings up and down equally, although actually only the down swings pose a risk for the investor. Eling / Schuhmacher show that there is, however, a high correlation between the known performance measures and that one will therefore arrive at similar results regardless of the measure used.

The higher the sterling ratio, the better an investment is: the higher the ratio, the higher the return and the lower the extent of the loss. The measure becomes negative if the average performance in the period under review was negative. Sterling ratios of up to 1.5 are occasionally observed; ratios above 3 are less common.

literature

• Martin Eling, Frank Schuhmacher: Performance Measurement of Hedge Fund Indices — Does the Measure Matter? In: Operations Research Proceedings 2005 . 2006, ISBN 978-3-540-32537-6 , pp. 205-210 , doi : 10.1007 / 3-540-32539-5_33 .
• Lars N. Kestner: Getting a Handle on True Performance . In: Futures . tape 25 , no. 1 , 1996, p. 44-46 .

swell

1. ↑ Sterling Ratio. In: Investopedia. Retrieved March 28, 2018 .