Bias Ratio

The bias ratio is a statistical measure used to identify whether a financial strategy or fund exhibits positive or negative bias in its returns distribution. It compares the sum of positive returns to the sum of negative returns over a specific period, providing insight into the consistency and directionality of returns. A high bias ratio indicates a strategy with consistently positive returns, while a low or negative bias ratio may suggest volatility or frequent losses.

Example

A hedge fund with a bias ratio of 1.5 has more positive returns than negative ones, suggesting that the fund’s strategy may be consistently effective in generating gains.