The question asks which fund is most vulnerable to ‘game’ its Sharpe ratio. I answered C but it seems both C and A can be the correct answers?
A hits the 2nd and 3rd attributes while C hits the 1st and 2nd attributes. What am I missing here?
I think it’s because for Fund A, adjusting the measurement interval from monthly to quarterly will lower the std deviation. This will artificially increase the sharpe ratio. So, really, all three attributes for Fund A will increase the sharpe ratio.
For Fund C, adjusting the measurement interval from quarterly to monthly will increase the std deviation. This will artificially decrease the sharpe ratio. So, really, only 1 attribute for Fund C will increase the sharpe ratio.