This scan showed the effects of the Black Swan market on portfolio return and on the math model used to compute Sharpe ratio. In this scan I included company stock PG which has most of the employee money, well over 5B not counting ESOP stock. As the gold standard for US stocks PG has a very nice return but at the cost of high volatility. As I keep reminding myself arithmetic says volatility kills compounding.**************
Several things about this scan were unusual. The first 3D scan image used 2.0% for the portfolio risk free rate causing an artifically high Sharpe ratio for portfolio No. 468 which had all the money in VMVXX. I ran the scan again using the risk free rate for VMVXX (2.862%) from the Thomson data for the portfolio risk free rate and got a "normal" 3D result. In effect the scanner found an arbitrage situation (artifical) in the data . This reminded me of an engineering design professor who used to say all models are wrong but some are still useful. Sharpe ratio is a useful model but it can be fooled if the data used to compute it are inconsistent. The rapid and large changes in market data in Q4 caused by a "Black Swan" created this situation which I had never seen before 2008 and hope to never see again.
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