M2 MeasureThe m2 measure, also know

M2 Measure
The m2 measure, also known as the as the Modigliani risk-adjusted performance measure, is a risk- adjusted performance measure. It is closely related to the Sharpe ratio, but does not have the downside of bring ‘dimensionless’ measure, moreover, in case of negative return, the m2 measure continues to hold its meaning while the Sharpe ratio very hard to interpret.
M2 Measure CALCULATION
The main question we want to address first is; how to measure m2? Practically, calculating the m2 measure is not more difficult than measuring the Sharpe
Step 1
First of all, we need to calculate the Sharpe ratio. In a next step, we will use the Sharpe ratio to derive the m2 measure. Thus, first we perform the following calculate which is just the standard (annual) Sharpe ratio the Sharpe ratio equation

Step 2
The second step consists of multiplying the Sharpe ratio by the (annualized) standard deviation of a benchmark. The benchmark can be freely chosen, e.g. the S&P500 index, the MSCI World index, or another broad index.
Step 3
In last step, we add the risk free rate again

We can rewrite the above measure differently to get a better understanding of what the m2 measure captures. As shown in the equation below, the M2 measure equals the excess return weighted over the benchmark’s and portfolio’s standard deviation and increased with the risk free return. Clearly, the M2 measure just equals the portfolio’s return when had the standard deviation of the portfolio equaled that of the benchmark. This is the case when happens when the portfolio is simply tracking an index

ALTERNATIVE M2 MEASURE
The is also an alternative m2 measure that is sometimes computed by Practioners. In this case, the systematic risk component is used instead of the full volatility component. However, this is only be a good indicator when the portfolio is well diversified. Under diversification may result in an underestimation of the riskiness of the the report portfolio, as their may be some idiosyncratic risk left

Summary
The M2 measure is an alternative and easy to alternative and easy to interpret risk-adjusted performance metric. If s closely related to the Sharp ratio, from which if is derived

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Measure M2
m2 The measure, also Known as the as the risk-adjusted Performance Modigliani measure, is a measure Risk- adjusted Performance. It is closely related to the Sharpe ratio, but does not have the downside of Bring 'dimensionless' measure, Moreover, in Case of negative Return, the m2 measure Continues to Hold ITS meaning while the Sharpe ratio very hard to INTERPRET.
M2 Measure CALCULATION.
The main question we want to address first is; how to measure m2? Practically, calculating the measure is not more difficult than measuring m2 the Sharpe
Step 1
First of all, we Need to Calculate the Sharpe ratio. In a next step, we will use the Sharpe ratio to derive the m2 measure. Thus, we Perform the following First Calculate which is just the standard (Annual) Sharpe ratio Sharpe ratio the Equation Step 2 Step The second consists of the Sharpe ratio Multiplying by the (annualized) standard deviation of a Benchmark. The Benchmark Can be freely Chosen, eg the S & P500 index, the MSCI World index, or another Broad index. Step 3 In last Step, we Add the risk free rate Again We Can Rewrite the above measure Differently to Get a better understanding of what the. m2 measure captures. As shown in the equation below, the M2 measure equals the excess return weighted over the benchmark's and portfolio's standard deviation and increased with the risk free return. Clearly, the M2 measure just equals the portfolio's return when had the standard deviation of the portfolio equaled that of the benchmark. This is when the Case Tracking happens when the Portfolio is simply an index M2 ALTERNATIVE MEASURE The measure is also an alternative that is sometimes computed by m2 Practioners. In this case, the systematic risk component is used instead of the full volatility component. However, this is only be a good indicator when the portfolio is well diversified. May Result in an underestimation of diversification under the riskiness of the Report the Portfolio, as their idiosyncratic risk Some May be left Summary The M2 measure is an alternative to alternative and Easy and Easy to INTERPRET risk-adjusted Performance METRIC. If s closely related to the Sharp ratio, from which if is derived.