Sharpe Ratio

The Sharpe ratio quantifies the risk-adjusted return of an investment, balancing expected return against volatility. Current research focuses on improving Sharpe ratio optimization through online learning algorithms, particularly in multi-armed bandit settings and unsupervised machine learning frameworks that leverage linear signals or incorporate ESG factors. These advancements aim to enhance portfolio construction and risk management, impacting both theoretical understanding of portfolio optimization and practical applications in finance, particularly in areas like socially responsible investing. Ongoing work explores robust estimation techniques to address challenges posed by unknown or changing data distributions.