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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