- CFA Exams
- CFA Level I Exam
- 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 about the Sharpe ratio is false?

B. A portfolio with a Sharpe ratio of 0.8 is 2 times better than a portfolio with a Sharpe ratio of 0.4.

C. The Sharpe ratio for one stock can be different among different investors.

A. The Sharpe ratio cannot be applied to risk-free assets.

B. A portfolio with a Sharpe ratio of 0.8 is 2 times better than a portfolio with a Sharpe ratio of 0.4.

C. The Sharpe ratio for one stock can be different among different investors.

Correct Answer: B

A is true. The zero standard deviation of such assets cannot be used as the denominator.

B is false. The Sharpe ratio can be used to rank portfolios but does not give any information about the economic significance of differences.C is true. If it is used as an ex ante measure of expected return and risk, it will likely vary among different investors.

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**User Contributed Comments**
4

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

fredpat01 |
Can someone explain why C is correct? |

cosmos1994 |
Different Investors have different portfolios hence different denominators |

Konstantis |
And different returns |

davidt87 |
historical sharpe ratio cant be different, but if youre using expected returns, then your expectations can be different |