Facilitating Portfolio Construction using Ex-ante Information Ratios and Maximum Sharpe Ratios
Please note that this paper has been accepted for publication and is no longer available inn the repository. The associated Excel file is available.
Abstract
Investors should consider Sharpe ratios and correlations together when adding a new fund to their existing portfolio. The ex-ante information ratio (also known as the appraisal ratio) is effective in informing this decision. However, a maximum Sharpe ratio calculation is equally effective in this decision while providing the additional benefit of producing optimal portfolio weights for the combined portfolio. In this paper, we demonstrate how to compute these measures to help facilitate portfolio construction.
This paper has been withdrawn.
