Buffett has been an amazing stock picker and used leverage.
In order to control for leverage, you typically look at volatility-adjusted measures of performance such as the Sharpe Ratio, not just absolute returns.
Berkshire's Sharpe Ratio from 1976-2011 was .76, vs. the S&P 500's .39. Even without the leverage, that's twice as good as the market.
In order to control for leverage, you typically look at volatility-adjusted measures of performance such as the Sharpe Ratio, not just absolute returns.
Berkshire's Sharpe Ratio from 1976-2011 was .76, vs. the S&P 500's .39. Even without the leverage, that's twice as good as the market.
Berkshire's Information Ratio during that time was .66, which definitely makes it an outlier: https://www.quora.com/What-is-Warren-Buffetts-Sharpe-ratio
More detail: https://www.nber.org/papers/w19681.pdf