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April 24, 2009
In case you were ever wondering
I've been thinking about the Sharp Ratio, the ratio of E{asset return -risk free return] / [Standard Deviation of asset return. It usually is better to use the geometric mean because it is resistant to the effects of outliers. But what should we use for the standard deviation? The variance is calculated from the arithmetic mean, so using that messes up the ratio. However, just like there is a geometric mean, so too is there a geometric variance. I was surprised to see that there was no Wikipedia page for this concept.
Posted by OneEyedMan at April 24, 2009 12:32 PM
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