Relative to the Sharpe ratio, the Sortino ratio will make a portfolio's performance look more favorable if the portfolio has experienced:
A) fewer extreme negative returns relative to extreme positive returns.
B) fewer extreme positive returns relative to extreme negative returns.
C) an equal number of extreme positive and extreme negative returns.
D) virtually no extreme negative or extreme positive returns.

Question

Quizplus · Accepted Answer

The Sortino ratio only considers downside volatility (negative returns) rather than total volatility like the Sharpe ratio. If a portfolio has fewer extreme negative returns, the Sortino ratio will be higher, making the performance look more favorable compared to the Sharpe ratio.

Relative to the Sharpe Ratio, the Sortino Ratio Will Make