Despite the bullish talk, Wall Street has China reservations
The growth juggernaut is trading at a discount
Any fool, with a bit of luck, can make a spectacular return by betting on a coin flip. Yet they risk losing everything in the process. The ultimate outcome for investors is a high return adjusted for the risk associated with it, an idea most famously captured by the “Sharpe ratio”. This divides the expected return of an asset, minus the risk-free rate that an investor could earn by parking their money in super-safe government bonds, by its standard deviation, a measure of the return’s volatility. A ratio above one is considered good. The Sharpe ratio of a double-or-nothing coin flip is negative.
This article appeared in the Finance & economics section of the print edition under the headline “Too much of a coin flip”
Finance & economics February 25th 2023
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From the February 25th 2023 edition
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