Question: What risk measure does the Sortino ratio use and why is it preferable to the risk measure employed in the Sharpe ratio? If returns are

  1. What risk measure does the Sortino ratio use and why is it preferable to the risk measure employed in the Sharpe ratio?
  2. If returns are normally distributed, explain why the Sharpe and Sortino ratio will rank securities in the same order.
  3. Using words, explain what skewness is. Why is it that investors prefer portfolios with returns that are positively skewed?

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