Sharpe ratio越大越好

问题如下：

Comparing the two strategies in Exhibit 2, the best risk-adjusted performance is demonstrated by

选项：

A.Strategy II in periods of low volatility and recession. B.Strategy I in periods of high volatility and non-recession. C.Strategy II in periods of high volatility and non-recession.

解释：

A is correct.

Using the Sharpe ratio, the best risk-adjusted relative performance can be determined by comparing the sensitivity of the two strategies under differing macroeconomic regimes: recession versus non-recession and high volatility versus low volatility. The best risk-adjusted return will exhibit the highest Sharpe ratio. Strategy II demonstrates higher risk-adjusted returns compared with Strategy I under all four macroeconomic conditions, particularly in periods of low volatility, when the Sharpe ratio outperformance is 0.96, and recessions, when the Sharpe ratio outperformance is 1.56.