Glossarytaught in AA1.03
Sortino ratio
Also called Sortino.
Excess return divided by downside deviation rather than total volatility, on the argument that upside movement is not risk.
The same portfolio with 15% downside deviation scores 0.76 against a Sharpe of 0.52.
It's a sensible refinement, and the measure is less used, partly because downside deviation is estimated from fewer observations and is therefore noisier.
It gives a fairer reading of strategies with asymmetric return profiles.