This ratio, which was developed by Nobel laureate William Sharpe in 1966, is calculated by taking the excess return
of an investment over the risk-free rate and dividing it by its standard deviation.
For example, the excess return
you expect to receive investing in stocks vs.
Here RE it represents excess returns
on portfolios at "i "time t; is [alpha]i intercept of portfolio i; rM is the excess return
on market, [beta]E is coefficient of excess market return, and it is found by regressing excess returns
of the portfolio with excess market returns.
At the same time, since Treasury securities typically have lower excess returns
than equities, adding them to the market proxy lowers the average excess return
on the market portfolio.
For each firm in the sample, we calculate monthly compounded returns adjusted for splitting and repurchasing for each fiscal year; we then subtract the return to a value-weighted market portfolio (NYSE/NASDAQ/AMEX) from this raw return to determine the net excess return
for the firm's corresponding fiscal year.
The researchers found that monetary momentum was economically different from time-series momentum, which they define as a strategy of investing in the market 15 days before an FOMC meeting whenever the stock market had positive excess returns
over the preceding 12 months, and shorting the market when the market's excess return
Plus, Eagle Select Focus 5 is the exclusive home of the brand-new allocation option: The S&P 500(r) Dividend Aristocrats(r) Daily Risk Control 5% Excess Return
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The index is designed to measure a 100% long index weight in the S&P BSE SENSEX Total Return Index and a 100% short index weight in the S&P BSE SENSEX Futures Excess Return
The S&P MARC 5% Index is designed to track the performance of a risk-weighted portfolio consisting of three asset classes -- equities, commodities and fixed income -- represented by three component indices: the S&P 500 Excess Return
Index, the S&P GSCI Gold Excess Return
Index and the S&P 10-Year U.S.
The excess return
variable based on EUP2 (equilibrium underwriting profit based on municipal bonds) is not included in this study since it is not expected to make much differences in theory and practice.
Moreover, this trading strategy has worked in two out of every three calendar years with an average of 2.4% excess return
over the B&HS.
As the first futures-based ETF product issued by a Chinese manager, the CSOP Crude Oil ETF provides investment results closely corresponding to the performance of BofA Merrill Lynch Commodity index eXtra CLA Index (Excess Return
), which tracks the performance of December month WTI Futures Contracts and seeks to reduce transaction costs by rolling only once a year.