Sharpe ratio


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Sharpe ratio

A measure of a portfolio's excess return relative to the total variability of the portfolio. Related: Treynor index. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.

Sharpe Benchmark

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 benchmark 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.

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.

To figure the ratio, the risk-free return is subtracted from the average return of an investment portfolio over a period of time, and the result is divided by the standard deviation of the return.

A strategy with a higher ratio is less risky than one with a lower ratio.

This type of analysis, which is done using sophisticated computer programs, is named for William P. Sharpe, who won the Nobel Prize in economics in 1990.

References in periodicals archive ?
He then derives explicit expressions for the statistical distribution of the Sharpe ratio using standard asymptotic theory under several sets of assumptions for the return-generating process.
They find that financing frictions lower both the market Sharpe ratio and the correlation between the pricing kernel and returns.
The winners were chosen on the basis of various quantitative factors, including Sharpe ratio, performance and assets.
In December 2009, it was ranked second by Eurekahedge based on its annualized returns and Sharpe ratio, in recognition of the Fund's performance since its inception in August 2002.
And yet Resolute's Sharpe Ratio - a measure of the fund's reward per unit of risk - is over 6, a stunning achievement that places Resolute in rarified company among investment vehicles.
Sharpe ratio, alpha, beta, batting average and all the standard statistics down to a sector/market cap level
Since inception, the Fund's Sharpe Ratio, which measures risk-adjusted performance, ranks in the top decile within the long short equity category average.
64 per cent during 2009, delivering an annualised Sharpe ratio of 1.
In addition, the Fund is ranked number one among the 499 funds in the category according to both the Sharpe Ratio (a measure of the return per unit of risk) and Alpha (a measure of the difference between actual returns and expected/beta returns) statistics, also on a three-year basis.
HIGHER RISK-ADJUSTED RETURNS: The options-based funds had higher risk-adjusted returns (as measured by the Sharpe Ratio and Sortino Ratio) than the S&P 500 and S&P GSCI Indexes.
In addition, S&P viewed positively the fund's risk-adjusted performance, evidenced by its above-average Sharpe ratio, its below-average standard deviation and the fund's eight-year record with the current management team of (lead) Meggan Walsh and Jonathan Harrington.
The portfolio analysis software and investment analysis software and technology enable RIAs and other investment professionals to optimize portfolios using the efficient frontier as well as analyze risk metrics and manage risk by using several Modern Portfolio Theory statistics such as Alpha, Beta, R2, Sharpe Ratio and Correlation.