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I am trying to understand if the Sharpe ratio of a portfolio change if we increase or decrease the number of assets in the portfolio. It would be helpful if you could provide an explanation with references to financial papers.

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  • $\begingroup$ Are you asking this in context of some specific model or do you want a completely general answer? $\endgroup$ – Bob Jansen Nov 4 '20 at 7:53
  • $\begingroup$ the sharpe ratio contains portfolio variance, so that component's dynamics with number of assets is discussed here quant.stackexchange.com/questions/58314/… $\endgroup$ – develarist Nov 4 '20 at 8:07
  • $\begingroup$ Thanks a lot for your comments. I am running a simple LSTM based method for portfolio optimization and I observed similar sharpe ratios while considering the top k stocks (based on return ratio) which seemed a little unusual. $\endgroup$ – haemu Nov 5 '20 at 9:26
  • $\begingroup$ How do you mean similar and unusual $\endgroup$ – develarist Nov 5 '20 at 14:46

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