STARR Performance

STARR Performance – Similar to the Sharpe Ratio which is a standard deviation-based performance measure, but STARR (stable tail-adjusted return ratio) uses the ETL in the denominator as a risk measure. STARR can be seen as a more effective indicator of risk-‐adjusted performance because it penalizes only for downside risk, while the standard deviation does not distinguish between upside and downside risk.

Investors who are required to select and monitor investment managers should develop a basic understanding of investment statistics. Quantitative tools can provide you with good insight that you can use in your qualitative interviews with managers and when monitoring your investments.