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I may not have fully understood your question, but I assume you are asking what will happen on a leverage portfolio over time if the underlying price stays the same. A leveraged portfolio would likely eventually go to zero (and below) simply because of the cost of leverage. At minimum, you are borrowing at the risk-free rate. An ETF would just go to zero.


The textbook academic answer is that Sharpe ratio is not impacted by leverage as explained by other answers. However, reality tells a different tale entirely: Imagine you lever up your investments by such amount that your future performance will critically hinge on the following conditions: That those who extended credit to you will not re-call their ...


Sharpe ratio is defined as $\frac{(x - r)}{\sigma}$ where $x$ is return, $r$ is the risk free rate and $\sigma$ is volatility. Now levering up $n$ times multiplies both the return and volatility by $n$. But shouldn't the ratio change since $r$ stays the same? Ah, but remember, leverage isn't free. You have to fund leverage, and that cuts out of your return. ...


Generally no. Sharpe ratio should vary linearly. Use leverage: the return increases, but so does volatility. De-lever" the return decreases but, so does volatility.

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