%0 Journal Article %A James X. Xiong %A Thomas M. Idzorek %T A Case for Tail-Risk-Based Sharpe Ratios %D 2018 %R 10.3905/jpm.2018.44.3.114 %J The Journal of Portfolio Management %P 114-125 %V 44 %N 3 %X Surprisingly to many investors, low volatility tends to be accompanied with an undesirable risk characteristic: lower or negative skewness. A stock or fund can rank well based on the standard Sharpe ratio but low on enhanced tail-risk-based Sharpe ratios that account for non-normal returns, and vice versa. The authors quantify these economically meaningful ranking differences and show that skewness dominates other variables in explaining the ranking variations for the Conditional Value-at-Risk (CVaR)-based Sharpe ratio. Both skewness and serial correlation play important roles in the ranking variations for the maximum drawdown-based Sharpe ratio. TOPICS: Analysis of individual factors/risk premia, VAR and use of alternative risk measures of trading risk %U https://jpm.pm-research.com/content/iijpormgmt/44/3/114.full.pdf