This risk-adjusted measure was developed by Nobel Laureate William Sharpe. It is calculated by using standard deviation and excess return to determine reward per unit of risk.

Sharpe Ratio

Sharpe Ratio Named after Nobel Prize winner and capital asset pricing model -developer William Sharpe, it is a measure of the excess return on a portfolio relative to its total variability. Random Finance Terms for the Letter S Sharpe Benchmark Sharpe Ratio Shelf [Read more.

Sharpe ratio. A return / risk ratio developed by William Sharpe. The return (numerator) is defined as the incremental average return over and above the risk-free rate (T-Bill s). Risk (denominator) is defined as the standard deviation of these investment returns.

Sharpe ratio

A rough guide to whether the rewards from an INVESTMENT justify the RISK, invented by Bill Sharpe, a winner of the NOBEL PRIZE FOR ECONOMICS and co-creator of the CAPITAL ASSET PRICING MODEL.

Sharpe ratio

Using the Sharpe ratio is one way to compare the relationship of risk and reward in following different investment strategies, such as emphasizing growth or value investments, or in holding different combinations of investments.

Sharpe Ratio. A measure of how well a mutual fund rewards risk. A higher Sharpe Ratio indicates better risk-adjusted performance.

How The Sharpe Ratio Can Oversimplify Risk

Understanding The Sharpe Ratio

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Then the Sharpe ratio S is:

Where is the average of all excess returns over some period and σD is the standard deviation of those excess returns .

And finally.

A statistically created benchmark that adjusts for a manager’s index -like tendencies. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.

Sharpe ratio.

Understanding The Sharpe Ratio

Diversification? Optimal portfolio theory? Read this tutorial and these and other financial concepts will be made clear. Financial Concepts

Beta says something about price risk. but how much does it say about fundamental risk factor s? Beta: Know the Risk.

Alpha is one of five technical risk ratios; the others are beta, standard deviation, R-squared. and the Sharpe ratio. These are all statistical measurements used in modern portfolio theory (MPT).

Both the beta and standard deviation measure the volatility of a mutual fund; the higher the volatility, the higher the risk. The Sharpe Ratio measures the risk adjusted return.

Does all this sound too complicated? Well, you can still use these measurements for comparative purposes when buying funds.

The Sharpe Index gives information on how much extra return (risk premium ) a fund is capable of giving for each unit of risk (volatility), and so making it possible to compare investment funds that have the same benchmark. As a result, funds with higher Sharpe ratio s have a preference over others as.

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Sharpe ratio

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