Average Gain, Average Loss, and the Gain to Loss Ratio
When measuring hedge fund performance, one simple tool is to look at average gains and losses for periods.
The average gain considers only periods in which there was a gain, and is the simple average return in those periods. Likewise, the average loss is the simple average return in all periods in which there was a loss.
The gain to loss ratio is the average gain divided by the average loss.
What the gain to loss ratio does not tell you is how many periods realized gains and how many realized losses. It also fails to account for compounding of returns.
For more information, see all articles on: Uncategorized See also:
The Intelligent Investor: The Classic Text on Value Investing
Financial Statement Analysis: A Practitioner's Guide, 3rd Edition
Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)
