Comparative Analysis of Sharpe and Sortino Ratio with reference to Top Ten Banking and Finance Sector Mutual Funds

Abstract

Mutual fund represents a way of investing money into a professionally managed and diversified pool of securities that hopefully will provide a good return on unit holder’s money for the purpose of making an investment in mutual fund, fund manager prepare a professionally managed set of portfolios. A portfolio is defined as a collection of investments. As it is not desirable for any investor to invest all its funds in one individual security. Hence the performance of mutual funds takes very important role. There are various ratios to analyse the performance of mutual fund. Here with my analysis i want give an understanding of Sharpe ratio and Sortino ratio. As we know within the last few year considerable progresses has been made in three closely related areas-the theory of portfolio selection, the theory of the pricing of capital asset under the condition of risk, and the general behaviour of stock market prices. Result obtained in all three areas is relevant for evaluating mutual fund performance. However with this reference, i want to analyse the performance of mutual fund with the help of Sharpe ratio and Sortino ratio which are used for the portfolio evaluation and also want to give comparative analysis of Sortino ratio and Sharpe ratio.