There's no such thing as a free lunch...Or is there?

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It's official. The next president of Indonesia is former army general Prabowo Subianto. Quite how the next five years will pan out is anyone's guess but hopefully the foreign pundits who always bring up his dodgy human rights record will be proven wrong. Nonetheless, on policy making, Prabowo's popularist move to literally offer the poor 'a free lunch' every day of the week does not augur well for the future. Such a policy - if it ever came to fruition - would cost a phenomenal amount of money and likely lead to huge inefficiencies (food waste) and poor incentives (make people lazy). Another concern is Prabowo's strong nationalist bent. Thus, in the possible event that he finds himself with his back against the proverbial wall in the face of stern economic challenges, there is a big chance that he will simply scapegoat foreigners. But he will have to be careful. Construction of the new capital city, Nusantara, for example, is highly dependent on foreign in

Sharpe Ratio definition




The Sharpe ratio was developed by the Nobel laureate William F. Sharpe to measure risk-adjusted performance. This is important because a return only means anything to an investor if you take risk into account as well.

Let’s say, for example, that investment A gives you a return of 20% and investment B gives you a much lower return of 10%.

So which investment should you pick?

Answer? You don’t know! It’s a trick question because the level of associated risk is not given. If the 10% return on investment A was entirely riskless but the 20% return on investment B also involved you having to stick your head in a hungry lion’s jaw for 10 seconds, then most people would be eminently more satisfied with the lower return provided by investment A.

To calculate the Sharpe ratio is simple. You simply subtract the risk-free rate (something like the 10-year U.S. Treasury bond) from the rate of return on the portfolio and divide the result by the standard deviation of the portfolio returns (essentially its volatility).

How to interpret the Sharpe ratio?

Essentially, the Sharpe ratio indicates whether a given portfolio's returns owe to good investment allocations or excess risk taking.

The higher the number the better. If the number is low it indicates that the portfolio returns owe more to excess risk taking rather than good investment allocations.

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