- CFA Exams
- CFA Exam: Level I 2021
- Study Session 2. Quantitative Methods (1)
- Reading 7. Statistical Concepts and Market Returns
- Subject 8. The Sharpe Measure of Risk-Adjusted Performance

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**CFA Practice Question**

Which statement is false regarding Sharpe ratio?

B. Sharpe ratio cannot be applied to assets with negative beta.

C. If the investor does not have any other assets than the portfolio, then the use of total risk is appropriate in the Sharpe ratio.

A. Sharpe ratio can be used to rank portfolios.

B. Sharpe ratio cannot be applied to assets with negative beta.

C. If the investor does not have any other assets than the portfolio, then the use of total risk is appropriate in the Sharpe ratio.

Correct Answer: B

We can compare the Sharpe ratios of portfolios in order to rank them.

B is false. It does not even use beta.

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**User Contributed Comments**
2

User |
Comment |
---|---|

michlam14 |
treynor ratio cannot be applied to assets with neg beta |

chcarnes |
Sharpe uses standard deviation |