The Sortino measure differs from the Sharpe ratio in that
A) it measures the portfolio's average return in excess of a user-selected minimum acceptable return threshold.
B) it measures the portfolio beta.
C) higher values of the Sortino measure are not desirable, while higher values in the Sharpe ratio are desirable.
D) it measures standard deviation of total portfolio return.
E) it measures portfolio beta relative to the market index proxy.

Question

Quizplus · Accepted Answer

The Sortino measure focuses on the downside risk of a portfolio by measuring its average return in excess of a user-selected minimum acceptable return threshold. This minimum acceptable return threshold is typically set based on the investor's preferences and risk tolerance. On the other hand, the Sharpe ratio measures the excess return of a portfolio relative to its total risk, as measured by its standard deviation.

The Sortino Measure Differs from the Sharpe Ratio in That