Robust Sharpe Ratio

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University: University of St Andrews

Sector(s): Other

About Opportunity:

Our Robust Sharpe Ratio assesses your own and your clients investment opportunities reliably in any market condition (whereas the Sharpe ratio struggles to do this in mixed and bear markets). The technology can be applied in direct assessments of individual or multiple securities or in computerised investment algorithms.  It is fully customizable to personal or clients interests.  A framework patent is pending, which applied to all relevant Sharpe ratio substitutes. 

The original Sharpe Ratio is only fully reliable in bull markets but not in mixed or bear markets.  Comparing two assets both expecting a 1% loss during a bear market, the original Sharpe Ratio provides the better assessment for the asset with the higher risk (e.g. a 2% and 0.25% risk would lead to a Sharpe ratio of -0.5 and -4.0, respectively).  Our robust Sharpe Ratio solves this problem through the development of a 'synthetic division process' that replaces the Sharpe ratio's conventional division.

Common investment performance measures (e.g. Sharpe Ratio, Alpha) lack reliability in mixed bear markets, as economists designed them assumed never ending bull markets.  These reliability problems can potentially lead to concerns about fiduciary duties or legal issues.

Many investment performance measures lead to reasonable rankings of various assets but do not offer sensitive rations, as their assessment scores are of a reasonable order but do not have an intuitive, justifiable meaning underlying the exact scores.  The Robust Sharpe Ratio measures performance as return per unit of benchmark equivalent risk, which makes ranking and ratings meaningful

Our patent is pending, not only for the Robust Sharpe Ratio, but for the robust version of any return/risk ratio providing meaningful ranking and ratings.  As return/risk ratios are probably the most common family of investment performace measures, this framework patent has an extensive coverage providing unique opportunities.

Key Benefits:

  • Reliable in any market condition
  • Enhances prudence in investment and financial advice to clients
  • Customizable to client interest
  • Meaningful ranking and ratings
  • Adoptable to computerized investment algorithms
  • Implementation support possible from the University
  • Framework patent pending for any return/risk type ratio

Applications:

  • Assessments of individual or multiple secruites
  • Computerised investment algorithms

IP Status:

The University has sought to protect its Intellectual Property Rights and has filed a US patent application 61/445,948

The research group in the University's School of Management continues to analyse and develop methods of investmetn performance evaluation particularly in the, currently, not well understood bear markets.  The lead researcher has practical experience and is happy to provide implemntation support.  There have been no commercial parties involved in this research project to date and we would be willing to discuss this technology transfer opportunity with organisations with business interests relating to investment or financial advice.

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