TY - JOUR T1 - A Case for Tail-Risk-Based Sharpe Ratios JF - The Journal of Portfolio Management SP - 114 LP - 125 DO - 10.3905/jpm.2018.44.3.114 VL - 44 IS - 3 AU - James X. Xiong AU - Thomas M. Idzorek Y1 - 2018/01/31 UR - https://pm-research.com/content/44/3/114.abstract N2 - 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 ER -