What Is the Sharpe Ratio?
Sharpe published Mutual Fund Performance in 1966 and first called it the reward-to-variability ratio.
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1.What does the Sharpe ratio ask?
Sharpe published Mutual Fund Performance in 1966 and first called it the reward-to-variability ratio.
2.What are the three ingredients?
Excess return is average minus baseline; divide it by the standard deviation.
3.Both accounts average 8 percent with a baseline of 2. What is the excess return?
Marge's sum is 40 and Leo's is also 40; divided by 5 both average 8 percent.
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Sources (3)
- William F. Sharpe: The Sharpe Ratio (Journal of Portfolio Management, Fall 1994), Stanford-Fassung
- Standard deviation (Wikipedia, englisch)
- Eigene Rechnung: zwei synthetische Ergebnisreihen
Education only. Not financial advice.