Some form of success estimation is present in virtually all decision-making processes. In most cases, estimations are implicit and judgmental. However, in certain data-rich areas, success prospects can be sharpened into probabilities. Although funds may settle for an expected return that equals some fixed target return, that match results in only a 50% probability of success. However, important goals may require a higher success probability, such as 60%. In this article, the authors present an approach that facilitates calculation of success probabilities for many common investment situations. The key success factor turns out to be the target ratio (T-ratio), a generalization of the standard Sharpe ratio. In addition to fixed return targets, the T-ratio can be applied to a wide range of market-dependent targets such as policy portfolios, benchmark indexes, and/or peer group percentiles. Moreover, within the typically relevant range, a simple approximation can directly map T-ratio values into success probabilities. The structure of the T-ratio underscores the importance of more tightly integrating risk control considerations and success probabilities into the return-seeking process. TOPICS: Performance measurement, risk management, volatility measures Key Findings • The common practice of matching the expected portfolio return to some fixed target return may prove insufficient for critically important goals that require a higher than 50% probability of success. • To obtain a success probability above 50%, a fund’s risk–return structure must provide a sufficiently high T-ratio, a generalization of the Sharpe ratio. A simple formula, based on this T-ratio, can be applied to estimate success probability. • To preserve a fund’s return advantage and desired probability of success, the fund also must achieve a level of risk control that results in the T-ratio value associated with that probability.

中文翻译：

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夏普比率，目标比率和回报目标

几乎所有决策过程中都存在某种形式的成功估计。在大多数情况下，估计是隐含和判断性的。但是，在某些数据丰富的地区，成功的前景可以提高为几率。尽管资金可以使预期回报等于某些固定目标回报，但这种匹配只会导致成功概率为50％。但是，重要的目标可能需要更高的成功概率，例如60％。在本文中，作者提出了一种方法，可以简化许多常见投资情况下的成功概率计算。成功的关键因素是目标比率（T比率），是标准Sharpe比率的概括。除了固定回报率目标外，T比率还可以应用于各种取决于市场的目标，例如政策组合，基准索引和/或同级组百分比。此外，在通常相关的范围内，一个简单的近似值可以直接将T比值映射为成功概率。T比率的结构强调了将风险控制因素和成功概率更紧密地整合到寻求回报过程中的重要性。主题：绩效评估，风险管理，波动率度量主要发现•将预期投资组合收益与某个固定目标收益相匹配的普遍做法可能证明不足以用于要求成功概率高于50％的至关重要的重要目标。•为了获得超过50％的成功概率，基金的风险收益结构必须提供足够高的T比，即Sharpe比率的概括。根据这个T比率的一个简单公式，可用于估计成功概率。•为了保持基金的回报优势和理想的成功概率，基金还必须达到一定的风险控制水平，以达到与该概率相关的T比值。