Conditional Sharpe Ratios

Victor Chow, Christine W. Lai*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


Facing investment choices, investors may care more about potentially excess losses in a downtrend market than excess gains in an upside market. Conditional Sharpe ratios (. CSR) are statistical ordinates of conditional stochastic dominance (. CSD) that measure lower partial risk-adjusted excess returns of an asset with respect to return distribution on the benchmark. A multiple comparison of serial CSR statistics thus provides an overall view of portfolio performance corresponding to different market scenarios. An example demonstrates that CSR is able to discriminate funds' downside performance which the conventional Sharpe ratio generally fails to do. A large out-of-sample analysis of US mutual fund shows that CSR has predictability for portfolio future performance.

Original languageEnglish
Pages (from-to)117-133
Number of pages17
JournalFinance Research Letters
Publication statusPublished - 2015 Feb 1


  • Conditional sharpe ratio
  • Conditional stochastic dominance
  • Down-side risk
  • Information ratio
  • Portfolio choice
  • Sharp ratio

ASJC Scopus subject areas

  • Finance


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