Definition of Sharpe Ratio
What is the Sharpe Ratio
The Sharpe ratio is a method of calculating the risk-adjusted return of an investment. The ratio is calculated by subtracting the risk-free rate from the return on a specific investment for a time period, which is usually one year, and then dividing the resulting figure by the standard deviation of the historical (annual) returns for that investment. The higher the Sharpe ratio, the better investment’s historical risk-adjusted performance.
The Sharpe ratio has been criticized for equally weighting positive and negative price movements that contribute to volatility, as it implicitly indicates that positive shocks augment the portfolio’s riskiness.
The Sharpe ratio is one of five popular technical investment risk-reward ratios. The other risk-reward ratios are alpha, beta, r-squared and standard deviation.
GlobEx Markets Financial Dictionary of Terms, Phrases and Concepts
The GlobEx Markets financial dictionary is a reference resource that provides the definitions and explanations of various financial terms, phrases and concepts that are used in international finance and global investing. It includes a broad range of financial terms, such as those related to stocks, bonds, currencies, commodities, options, futures, crypto and much more.
A financial dictionary can be useful for anyone who wants to learn more about finance and investing, or who works in the financial industry. It can help clarify the meaning of technical terms and the language used in financial publications, reports and other sources.
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There are several benefits to using the GlobEx Markets financial dictionary, including:
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