Sharpe Performance Measure

Sharpe performance measure

A measure of risk-adjusted portfolio performance developed by William Sharpe. The index is calculated by dividing the risk premium return (average portfolio return less average risk-free return) divided by risk (standard deviation of portfolio returns). The Sharpe measure adjusts portfolio performance for total risk rather than market risk. Compare Treynor performance measure.

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Sharpe Performance Measure

In financial econometrics, a model for a portfolio's performance that attempts to account for a money manager's index-like tendencies. In other words, the Sharpe portfolio measure attempts to statistically calculate whether a portfolio's success was due to good management or the taking of excessive risk. The model measures a company's or portfolio's performance against a series of securities indices. It is perhaps more commonly known as the Sharpe ratio.