Title: Incremental Sharpe and other performance ratios,
Abstract: We present a new methodology of computing incremental contribution for
performance ratios for portfolio like Sharpe, Treynor, Calmar or Sterling
ratios. Using Euler's homogeneous function theorem, we are able to decompose
these performance ratios as a linear combination of individual modified
performance ratios. This allows understanding the drivers of these performance
ratios as well as deriving a condition for a new asset to provide incremental
performance for the portfolio. We provide various numerical examples of this
performance ratio decomposition.