What the Sharpe ratio measures — excess return per unit of risk: (R - Rf) / σ

What the Sharpe ratio's limitation is — it penalizes upside volatility as much as downside

Sharpe ratio doesn't differentiate between positive and negative volatility impacts on returns

What the Sortino ratio improves over Sharpe — only penalizes downside volatility

Sortino ratio focuses on downside deviation, unlike Sharpe ratio

What the efficient frontier is — the set of portfolios with maximum return for each risk level

The efficient frontier represents optimal portfolios with highest returns for given risk levels

What Modern Portfolio Theory says — diversification reduces risk without reducing expected return

MPT asserts that diversification lowers unsystematic risk while maintaining expected return

What a dividend yield measures — annual dividend divided by share price

Dividend yield measures the percentage of annual dividend relative to the current share price

What the information ratio measures — excess return per unit of tracking error vs a benchmark

Information ratio measures excess return per unit of tracking error relative to a benchmark