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 used the usual performance measures, the Sharpe, Treynor ratios and Jensen Alpha in addition to the adjusted Sharpe Ratios, Modigliani measure and time and selectivity ability.
We find that Sharpe ratios of the shorter maturity portfolios are higher than those of longer maturity portfolios.
Finally, we mixed the pure equity-options momentum strategies with index-options selling strategies, achieving impressive results, with Sharpe ratios approximately 1.
In Tables 2, 3, and 4, the excess average returns, alphas, and Sharpe ratios are presented, respectively, on a monthly basis for each portfolio of funds, representing their performance.
Comparison of Sharpe Ratios, 1988-2007 Sharpe ratio Annualized Sharpe ratio of buy-and-hold investor 0.
Standard Deviation, Sharpe Ratios and even R-squared are other measures which measure risk of a portfolio which can aid you in finding out how active your manager is but these are probably too detailed for our purposes here.
All survey inputs and StockTrak outcomes were summarized along with the project evaluations, portfolio returns, Sharpe ratios, investor utility for "decision quality" measurements, and the number of trades for "information sharing effectiveness.
Farmland is a highly attractive asset class with high Sharpe ratios but at the same time a difficult asset class for most investors to access.
Further, our findings indicate that adding gold to stock portfolios improves their Sharpe ratios irrespective of their style (market, value, growth, small, big, momentum winners and losers) during most business economic regimes, but it reduces their Sharpe ratios during periods of rising dollar value and recessions.
To account for risk reward, Sharpe Ratios show that MHAR-RV portfolio is superior for target levels of 17.
Table 1: Sharpe Ratios (%) for the period 2005-2011_ Asset Class Expected Return SD Sharpe Ratio S&P CNX Nifty 11.
The following table shows the 1-year returns, risk (as measured by standard deviation) and Sharpe ratios (a measure of risk-adjusted performance) for index proxies for U.