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 ?
BDO Trust racks up fund management awards in SE Asia !-- -- (The Philippine Star) - August 4, 2019 - 12:00am MANILA, Philippines The Trust and Investments Group of BDO Unibank, the country's largest bank, bagged three major awards in Alpha Southeast Asia's inaugural Fund Management Awards 2019, including the Philippines' Best Overall Asset and Fund Manager and Best Asset Manager for Equity and Fixed Income Funds, and the Best Fund with the optimal Sharpe ratio category.
One metric you can use to measure the performance of an investment is called the Sharpe ratio.
Researches on the performance analysis of Sharia mutual funds have also been conducted by several previous researchers, such as a research by Waridah and Mediawati (2016) which examined specifically on the Sharia equity mutual fund instruments using Sharpe Ratio performance measurement method during the 2010-2014 period.
Sharpe ratio confirms the results of Merton (1987), who propositioned that idiosyncratic risk contributes to explaining the returns of securities and their prices.
Although it is beyond the scope of this paper to describe in detail those measures, it is important to mention the Sharpe ratio (Dowd 2000; Jagric et al.
This corresponds to a positive three-year Sharpe ratio (a risk-adjusted measure of performance) for 85% of CKG's AUM.
Buying-and-holding the market throughout the year produced an annualized Sharpe ratio of 0.31.
Strategy A--Maximize Risk-Adjusted Return (Sharpe Ratio): This manager follows modern portfolio theory and seeks to build an "efficient" portfolio that recognizes the tradeoff between volatility and return.
With a risk-free asset, this can be simplified to maximizing the Sharpe ratio of a portfolio, which is its excess return per unit of total portfolio risk.
Investors need to use benchmark-independent measures of risk-adjusted return, such as the Sharpe Ratio, Sortino Ratio and Omega Ratio.