Appraisal Ratio

Appraisal Ratio Definition

The appraisal ratio is use by fund of fund portfolio managers or hedge fund consultants but is less often seen on a standard 1-2 page hedge fund analytics reports. You find the Appraisal Ratio by taking the alpha of the hedge fund portfolio and dividing it by the non-systematic risk of the portfolio. The result is a ratio that measures the abnormal returns per unit of risk that could at least in principle be diversified away by holding a market index portfolio.

Want to learn more about the Appraisal Ratio?

Journal Article using the Appraisal Ratio to look at Japanese Equities
PowerPoint Presentation on Ratios, including the Appraisal Ratio
Investment analytics report discussing the use of the Appraisal and other portfolio management ratios

Read dozens of additional articles like this within the guide to Hedge Fund Terms.

- Richard

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