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Sharpe ratio

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magnitude of the Sharpe ratio is sensitive to the time period over which the underlying returns are measured. This is because the nominator of the ratio (returns) scales in proportion to time; while the denominator of the ratio (standard deviation) scales in proportion to the square root of time. Most diversified indexes of equities, bonds, mortgages or commodities have annualized Sharpe ratios below 1, which suggests that a Sharpe ratio consistently above 2.0 or 3.0 is unrealistic.
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In recent years, many financial websites have promoted the idea that a Sharpe Ratio "greater than 1 is considered acceptable; a ratio higher than 2.0 is considered very good; and a ratio above 3.0 is excellent." While it is unclear where this rubric originated online, it makes little sense since the
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call and selling one out-of-the-money put. This portfolio generates an immediate positive payoff, has a large probability of generating modestly high returns, and has a small probability of generating huge losses. Shah (2014) observed that such a portfolio is not suitable for many investors, but fund
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Bailey and López de Prado (2012) show that Sharpe ratios tend to be overstated in the case of hedge funds with short track records. These authors propose a probabilistic version of the Sharpe ratio that takes into account the asymmetry and fat-tails of the returns' distribution. With regards to the
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Even in less extreme cases, a reliable empirical estimate of Sharpe ratio still requires the collection of return data over sufficient period for all aspects of the strategy returns to be observed. For example, data must be taken over decades if the algorithm sells an insurance that involves a high
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The Sharpe ratio is convenient because it can be calculated purely from any observed series of returns without need for additional information surrounding the source of profitability. However, this makes it vulnerable to manipulation if opportunities exist for smoothing or discretionary pricing of
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In 1952, Arthur D. Roy suggested maximizing the ratio "(m-d)/σ", where m is expected gross return, d is some "disaster level" (a.k.a., minimum acceptable return, or MAR) and σ is standard deviation of returns. This ratio is just the Sharpe ratio, only using minimum acceptable return instead of the
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The Sharpe ratio seeks to characterize how well the return of an asset compensates the investor for the risk taken. When comparing two assets, the one with a higher Sharpe ratio appears to provide better return for the same risk, which is usually attractive to investors.
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will have a high empirical Sharpe ratio until one of those puts is exercised, creating a large loss. In both cases, the empirical standard deviation before failure gives no real indication of the size of the risk being run.
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Suppose the asset has an expected return of 15% in excess of the risk free rate. We typically do not know if the asset will have this return. We estimate the risk of the asset, defined as standard deviation of the asset's
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developed what is now known as the Sharpe ratio. Sharpe originally called it the "reward-to-variability" ratio before it began being called the Sharpe ratio by later academics and financial operators. The definition was:
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can be used to convert the Sharpe ratio into a rate of return. The Kelly criterion gives the ideal size of the investment, which when adjusted by the period and expected rate of return per unit, gives a rate of return.
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A negative Sharpe ratio means the portfolio has underperformed its benchmark. All other things being equal, an investor typically prefers a higher positive Sharpe ratio as it has either higher returns or lower
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This curve illustrates the fact that it is efficient to hire portfolio managers with low and even negative Sharpe ratios, as long as their correlation to the other portfolio managers is sufficiently low.
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had a Sharpe ratio of 0.76 for the period 1976 to 2011, higher than any other stock or mutual fund with a history of more than 30 years. The stock market had a Sharpe ratio of 0.39 for the same period.
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determined that the best strategy to maximize a portfolio's Sharpe ratio, when both securities and options contracts on these securities are available for investment, is a portfolio of selling one
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funds), the Sharpe ratio should be derived from the performance of the underlying assets rather than the fund returns (Such a model would invalidate the aforementioned Ponzi scheme, as desired).
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algorithm may only require a week of data if each trade occurs every 50 milliseconds, with care taken toward risk from unexpected but rare results that such testing did not capture (see
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The accuracy of Sharpe ratio estimators hinges on the statistical properties of returns, and these properties can vary considerably among strategies, portfolios, and over time.
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risk-free rate in the numerator, and using standard deviation of returns instead of standard deviation of excess returns in the denominator. Roy's ratio is also related to the
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Bailey, D. and M. Lopez de Prado (2013): "The Strategy Approval Decision: A Sharpe Ratio Indifference Curve approach", Algorithmic Finance 2(1), pp. 99-109 Available at
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Sharpe ratio uses the same equation as the one above but with realized returns of the asset and benchmark rather than expected returns; see the second example below.
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Sharpe's 1994 revision acknowledged that the basis of comparison should be an applicable benchmark, which changes with time. After this revision, the definition is:
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The (original) Sharpe ratio has often been challenged with regard to its appropriateness as a fund performance measure during periods of declining markets.
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Several statistical tests of the Sharpe ratio have been proposed. These include those proposed by Jobson & Korkie and Gibbons, Ross & Shanken.
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An investor has a portfolio with an expected return of 12% and a standard deviation of 10%. The rate of interest is 5%, and is risk-free.
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sponsors who select fund managers primarily based on the Sharpe ratio will give incentives for fund managers to adopt such a strategy.
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is a generalization of the Sharpe ratio that uses as benchmark some other, typically risky index rather than using risk-free returns.
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of the investment returns. It represents the additional amount of return that an investor receives per unit of increase in risk.
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Bailey, D. and M. López de Prado (2012): "The Sharpe Ratio Efficient Frontier", Journal of Risk, 15(2), pp.3-44. Available at
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can be problematic for the ratio, as standard deviation doesn't have the same effectiveness when these problems exist.
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Jobson JD; Korkie B (September 1981). "Performance hypothesis testing with the Sharpe and Treynor measures".
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The returns measured can be of any frequency (i.e. daily, weekly, monthly or annually), as long as they are
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will equal the Sharpe Ratio times the square root of T (the number of returns used for the calculation).
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Additionally, when examining the investment performance of assets with smoothing of returns (such as
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Scholz, Hendrik (2007). "Refinements to the Sharpe ratio: Comparing alternatives for bear markets".
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selection of portfolio managers on the basis of their Sharpe ratios, these authors have proposed a
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Gibbons M; Ross S; Shanken J (September 1989). "A test of the efficiency of a given portfolio".
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Lo, Andrew W. "The statistics of Sharpe ratios." Financial analysts journal 58.4 (2002): 36-52
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Gatfaoui, Hayette. "Sharpe Ratios and Their Fundamental Components: An Empirical Study".
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Goetzmann, William; Ingersoll, Jonathan; Spiegel, Matthew; Welch, Ivo (2002),
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are sometimes used to indicate the potential presence of these problems.
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Since its revision by the original author, William Sharpe, in 1994, the
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Roy, Arthur D. (July 1952). "Safety First and the Holding of Assets".
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Lo, Andrew W. (July–August 2002). "The Statistics of Sharpe Ratios".
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Practical Portfolio Performance Measurement and Attribution 2nd Ed
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is the numerical fraction of wealth suggested for the investment.
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of the excess of the asset return over the benchmark return, and
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of a portfolio, the Sharpe ratio considers both systematic and
1932:"A Comparison of Different Measures of Risk-adjusted Return" 494:, are often used to rank the performance of portfolio or 742:
is a constant risk-free return throughout the period,
705:{\displaystyle S={\frac {E}{\sqrt {\mathrm {var} }}}.} 607:{\displaystyle S={\frac {E}{\sqrt {\mathrm {var} }}}.} 1506:"Risks and Portfolio Decisions Involving Hedge Funds" 1223: 1187: 1155: 1135: 1115: 1083: 1051: 941: 856: 751: 721: 626: 541: 394: 341: 306: 279: 112: 2363: 2224: 2189: 2141: 2053: 2005: 1998: 1244: 1201: 1173: 1141: 1121: 1101: 1065: 968: 917: 821: 734: 704: 606: 409: 376: 319: 292: 262: 1951:Calculating and Interpreting Sharpe Ratios online 1414:Sharpe, W. F. (1966). "Mutual Fund Performance". 1281:Goetzmann, Ingersoll, Spiegel, and Welch (2002) 468:liability payout once every 5–10 years, and a 2647: 1972: 1865:The Sharpe Ratio: Statistics and Applications 8: 1941:- Some example calculations of Sharpe ratios 1737:Paul Wilmott introduces Quantitative Finance 1551:http://docs.lhpedersen.com/BuffettsAlpha.pdf 1409: 1407: 969:{\displaystyle {\frac {0.12-0.05}{0.1}}=0.7} 2654: 2640: 2632: 2002: 1979: 1965: 1957: 1610: 1504:Agarwal, Vikas; Naik, Narayan Y. (2004). 1458: 1236: 1227: 1222: 1191: 1186: 1164: 1159: 1154: 1134: 1114: 1092: 1087: 1082: 1055: 1050: 942: 940: 899: 888: 877: 864: 857: 855: 794: 792: 778: 754: 752: 750: 726: 720: 687: 663: 652: 633: 625: 578: 567: 548: 540: 400: 395: 393: 365: 352: 340: 311: 305: 284: 278: 245: 232: 214: 203: 190: 177: 166: 152: 139: 126: 117: 111: 996:illiquid assets. Statistics such as the 1831:https://doi.org/10.2469/faj.v58.n4.2453 1403: 1899:The Principal-Agent Problem in Finance 1888:, National Bureau of Economic Research 1812:The Principal-Agent Problem in Finance 1337:List of financial performance measures 2759:Present value of growth opportunities 2679:Cyclically adjusted price-to-earnings 1927:- Uses and abuses of the Sharpe Ratio 7: 2725:Enterprise value/gross cash invested 451:However, financial assets are often 27:Formula for measuring financial risk 1947:- Risk adjusted return calculations 1741:(Second ed.). Wiley. pp.  1447:The Journal of Portfolio Management 1267:Drawback as fund selection criteria 1851:Investment Performance Measurement 1576:10.1111/j.1540-6261.1981.tb04891.x 801: 798: 795: 761: 758: 755: 670: 667: 664: 585: 582: 579: 221: 218: 215: 25: 1798:https://ssrn.com/abstract=2003638 1786:https://ssrn.com/abstract=1821643 50:) measures the performance of an 2254:Conditional Value-at-Risk (CVaR) 1713:"Understanding The Sharpe Ratio" 1245:{\displaystyle \mu /\sigma ^{2}} 1045:For Brownian walk, Sharpe ratio 421:of the asset excess return. The 2830:Risk-adjusted return on capital 1510:The Review of Financial Studies 1352:Risk adjusted return on capital 1274:Sharpe ratio indifference curve 2573:Strategic financial management 2376:Asset and liability management 1217:, and, indeed, Kelly fraction 811: 805: 784: 765: 693: 674: 658: 639: 595: 589: 573: 554: 371: 345: 251: 225: 209: 183: 158: 132: 1: 1280: 1174:{\displaystyle 1/{\sqrt {T}}} 1102:{\displaystyle 1/{\sqrt {T}}} 410:{\displaystyle {\sigma _{a}}} 2691:Cash return on cash invested 1939:What is a good Sharpe Ratio? 1691:10.1057/palgrave.jam.2250040 1357:Roy's safety-first criterion 1109:, because the excess return 1066:{\displaystyle \mu /\sigma } 103:Sharpe ratio is defined as: 2151:Operational risk management 1815:, CFA Institute, p. 14 1679:Journal of Asset Management 1441:Sharpe, William F. (1994). 1312:Capital asset pricing model 1002:first order autocorrelation 48:reward-to-variability ratio 2916: 2812:Return on capital employed 2323:Proportional hazards model 2274:Interest rate immunization 1768:Financial Analysts Journal 1491:IESEG School of Management 486:Sharpe ratios, along with 66:, after adjusting for its 2824:Return on tangible equity 2669: 2606: 1992:financial risk management 1925:All Hail the Sharpe Ratio 1853:. New York: Wiley, 2003. 2777:Price-earnings to growth 2269:First-hitting-time model 2234:Arbitrage pricing theory 1945:Sharpe ratio in MS excel 1920:Generalized Sharpe Ratio 1882:Sharpening Sharpe Ratios 1322:Hansen–Jagannathan bound 1317:Coefficient of variation 979:Strengths and weaknesses 453:not normally distributed 2719:Enterprise value/EBITDA 2578:Stress test (financial) 2284:Modern portfolio theory 1896:Shah, Sunit N. (2014), 1809:Shah, Sunit N. (2014), 1460:10.3905/jpm.1994.409501 1342:Modern portfolio theory 1142:{\displaystyle \sigma } 2731:Enterprise value/sales 1733:Wilmott, Paul (2007). 1564:The Journal of Finance 1382:Upside potential ratio 1255:In some settings, the 1246: 1215:dimensionless quantity 1203: 1175: 1143: 1123: 1103: 1067: 970: 919: 823: 736: 706: 608: 470:high-frequency trading 411: 378: 333:U.S. Treasury security 321: 294: 264: 85:, who developed it in 2616:Investment management 2518:Investment management 2244:Replicating portfolio 2020:Sovereign credit risk 1362:Signal-to-noise ratio 1247: 1204: 1176: 1144: 1124: 1104: 1068: 1034:and higher peaks, or 971: 935:The Sharpe ratio is: 920: 824: 737: 735:{\displaystyle R_{f}} 707: 609: 412: 379: 322: 320:{\displaystyle R_{b}} 300:is the asset return, 295: 293:{\displaystyle R_{a}} 265: 2800:Return on net assets 2621:Mathematical finance 2553:Risk-return spectrum 2543:Mathematical finance 2498:Fundamental analysis 2431:Exchange traded fund 2015:Consumer credit risk 1221: 1185: 1153: 1149:are proportional to 1133: 1122:{\displaystyle \mu } 1113: 1081: 1075:dimensional quantity 1049: 1024:normally distributed 939: 854: 749: 719: 624: 539: 392: 339: 304: 277: 110: 18:Market price of risk 2685:Capitalization rate 2611:Financial economics 2568:Statistical finance 2334:Value-at-Risk (VaR) 2239:Black–Scholes model 2079:Holding period risk 1867:. CRC Press, 2022. 1416:Journal of Business 1202:{\displaystyle 1/T} 1129:and the volatility 1017:idiosyncratic risks 1011:considers only the 81:It was named after 38:(also known as the 2895:Portfolio theories 2890:Statistical ratios 2858:Sustainable growth 2588:Structured product 2583:Structured finance 2563:Speculative attack 2249:Cash flow matching 2212:Non-financial risk 2109:Interest rate risk 2035:Concentration risk 1953:- Cloud calculator 1522:10.1093/rfs/hhg044 1443:"The Sharpe Ratio" 1242: 1199: 1171: 1139: 1119: 1099: 1063: 966: 915: 819: 732: 702: 604: 500:Berkshire Hathaway 419:standard deviation 407: 374: 317: 290: 260: 76:standard deviation 2872: 2871: 2806:Return on capital 2674:Buffett indicator 2629: 2628: 2401:Corporate finance 2396:Capital structure 2350:Cash flow at risk 2346:Liquidity at risk 2319:Survival analysis 2220: 2219: 2166:Reputational risk 2040:Credit derivative 1934:. September 2013. 1873:978-1-032-01930-7 1849:Bruce J. Feibel. 1845:978-0-470-05928-9 1752:978-0-470-31958-1 1327:Information ratio 1209:correspondingly. 1169: 1097: 990:utility functions 958: 907: 894: 814: 787: 697: 696: 599: 598: 529:William F. Sharpe 437:information ratio 377:{\displaystyle E} 255: 254: 172: 83:William F. Sharpe 74:, divided by the 16:(Redirected from 2907: 2885:Financial ratios 2818:Return on equity 2794:Return on assets 2748:Operating margin 2663:Financial ratios 2656: 2649: 2642: 2633: 2503:Growth investing 2421:Enterprise value 2371:Asset allocation 2354:Earnings at risk 2336:and extensions ( 2279:Market portfolio 2143:Operational risk 2128:Refinancing risk 2003: 1981: 1974: 1967: 1958: 1935: 1915:The Sharpe ratio 1904: 1903: 1891: 1889: 1887: 1817: 1816: 1806: 1800: 1794: 1788: 1782: 1776: 1775: 1763: 1757: 1756: 1740: 1730: 1724: 1723: 1721: 1719: 1709: 1703: 1702: 1674: 1668: 1667: 1639: 1633: 1632: 1614: 1605:(5): 1121–1152. 1594: 1588: 1587: 1559: 1553: 1548: 1542: 1541: 1501: 1495: 1494: 1486: 1480: 1479: 1477: 1475: 1462: 1438: 1432: 1431: 1411: 1285:out-of-the-money 1251: 1249: 1248: 1243: 1241: 1240: 1231: 1208: 1206: 1205: 1200: 1195: 1180: 1178: 1177: 1172: 1170: 1165: 1163: 1148: 1146: 1145: 1140: 1128: 1126: 1125: 1120: 1108: 1106: 1105: 1100: 1098: 1093: 1091: 1072: 1070: 1069: 1064: 1059: 975: 973: 972: 967: 959: 954: 943: 924: 922: 921: 916: 908: 900: 895: 893: 892: 883: 882: 881: 869: 868: 858: 828: 826: 825: 820: 815: 804: 793: 788: 783: 782: 764: 753: 741: 739: 738: 733: 731: 730: 711: 709: 708: 703: 698: 692: 691: 673: 662: 661: 657: 656: 634: 613: 611: 610: 605: 600: 588: 577: 576: 572: 571: 549: 416: 414: 413: 408: 406: 405: 404: 383: 381: 380: 375: 370: 369: 357: 356: 329:risk-free return 326: 324: 323: 318: 316: 315: 299: 297: 296: 291: 289: 288: 269: 267: 266: 261: 256: 250: 249: 237: 236: 224: 213: 212: 208: 207: 195: 194: 178: 173: 171: 170: 161: 157: 156: 144: 143: 127: 122: 121: 72:risk-free return 21: 2915: 2914: 2910: 2909: 2908: 2906: 2905: 2904: 2900:Yield (finance) 2875: 2874: 2873: 2868: 2765:Price/cash flow 2708:Dividend payout 2665: 2660: 2630: 2625: 2602: 2538:Systematic risk 2436:Expected return 2416:Economic bubble 2411:Diversification 2406:Cost of capital 2359: 2216: 2185: 2137: 2119:Volatility risk 2083:Price area risk 2049: 2025:Settlement risk 1994: 1985: 1930: 1911: 1902:, CFA Institute 1895: 1894: 1885: 1878: 1877: 1863:Steven E. Pav. 1839:: Wiley, 2008. 1826: 1824:Further reading 1821: 1820: 1808: 1807: 1803: 1795: 1791: 1783: 1779: 1765: 1764: 1760: 1753: 1732: 1731: 1727: 1717: 1715: 1711: 1710: 1706: 1676: 1675: 1671: 1656:10.2307/1907413 1641: 1640: 1636: 1621:10.2307/1913625 1612:10.1.1.557.1995 1596: 1595: 1591: 1561: 1560: 1556: 1549: 1545: 1503: 1502: 1498: 1488: 1487: 1483: 1473: 1471: 1440: 1439: 1435: 1422:(S1): 119–138. 1413: 1412: 1405: 1400: 1298: 1269: 1257:Kelly criterion 1232: 1219: 1218: 1211:Kelly criterion 1183: 1182: 1151: 1150: 1131: 1130: 1111: 1110: 1079: 1078: 1047: 1046: 1013:systematic risk 981: 944: 937: 936: 884: 873: 860: 859: 852: 851: 838: 774: 747: 746: 722: 717: 716: 683: 648: 635: 622: 621: 563: 550: 537: 536: 517: 509: 492:Jensen's alphas 445: 396: 390: 389: 361: 348: 337: 336: 307: 302: 301: 280: 275: 274: 241: 228: 199: 186: 179: 162: 148: 135: 128: 113: 108: 107: 95: 64:risk-free asset 28: 23: 22: 15: 12: 11: 5: 2913: 2911: 2903: 2902: 2897: 2892: 2887: 2877: 2876: 2870: 2869: 2867: 2866: 2861: 2855: 2850: 2847:Short interest 2844: 2839: 2833: 2827: 2821: 2815: 2809: 2803: 2797: 2791: 2786: 2780: 2774: 2771:Price-earnings 2768: 2762: 2756: 2750: 2745: 2740: 2734: 2728: 2722: 2716: 2713:Earnings yield 2710: 2705: 2703:Dividend cover 2700: 2697:Debt-to-equity 2694: 2688: 2682: 2676: 2670: 2667: 2666: 2661: 2659: 2658: 2651: 2644: 2636: 2627: 2626: 2624: 2623: 2618: 2613: 2607: 2604: 2603: 2601: 2600: 2595: 2590: 2585: 2580: 2575: 2570: 2565: 2560: 2555: 2550: 2545: 2540: 2535: 2530: 2525: 2520: 2515: 2510: 2505: 2500: 2495: 2494: 2493: 2488: 2483: 2478: 2473: 2468: 2463: 2458: 2453: 2448: 2438: 2433: 2428: 2423: 2418: 2413: 2408: 2403: 2398: 2393: 2388: 2383: 2378: 2373: 2367: 2365: 2364:Basic concepts 2361: 2360: 2358: 2357: 2342:Margin at risk 2338:Profit at risk 2331: 2329:Tracking error 2326: 2316: 2311: 2306: 2301: 2299:Risk-free rate 2296: 2291: 2286: 2281: 2276: 2271: 2266: 2261: 2256: 2251: 2246: 2241: 2236: 2230: 2228: 2222: 2221: 2218: 2217: 2215: 2214: 2209: 2204: 2199: 2197:Execution risk 2193: 2191: 2187: 2186: 2184: 2183: 2178: 2176:Political risk 2173: 2168: 2163: 2158: 2153: 2147: 2145: 2139: 2138: 2136: 2135: 2124:Liquidity risk 2121: 2116: 2114:Inflation risk 2111: 2106: 2104:Margining risk 2101: 2096: 2094:Valuation risk 2091: 2086: 2063:Commodity risk 2059: 2057: 2051: 2050: 2048: 2047: 2045:Securitization 2042: 2037: 2032: 2027: 2022: 2017: 2011: 2009: 2000: 1996: 1995: 1988:Financial risk 1986: 1984: 1983: 1976: 1969: 1961: 1955: 1954: 1948: 1942: 1936: 1928: 1922: 1917: 1910: 1909:External links 1907: 1906: 1905: 1892: 1875: 1861: 1847: 1833: 1825: 1822: 1819: 1818: 1801: 1789: 1777: 1758: 1751: 1725: 1704: 1685:(5): 347–357. 1669: 1650:(3): 431–450. 1634: 1589: 1570:(4): 888–908. 1554: 1543: 1496: 1481: 1433: 1428:10.1086/294846 1402: 1401: 1399: 1396: 1395: 1394: 1389: 1384: 1379: 1374: 1372:Sterling ratio 1369: 1364: 1359: 1354: 1349: 1344: 1339: 1334: 1332:Jensen's alpha 1329: 1324: 1319: 1314: 1309: 1304: 1297: 1294: 1268: 1265: 1239: 1235: 1230: 1226: 1198: 1194: 1190: 1168: 1162: 1158: 1138: 1118: 1096: 1090: 1086: 1077:and has units 1062: 1058: 1054: 980: 977: 965: 962: 957: 953: 950: 947: 914: 911: 906: 903: 898: 891: 887: 880: 876: 872: 867: 863: 837: 834: 830: 829: 818: 813: 810: 807: 803: 800: 797: 791: 786: 781: 777: 773: 770: 767: 763: 760: 757: 729: 725: 713: 712: 701: 695: 690: 686: 682: 679: 676: 672: 669: 666: 660: 655: 651: 647: 644: 641: 638: 632: 629: 615: 614: 603: 597: 594: 591: 587: 584: 581: 575: 570: 566: 562: 559: 556: 553: 547: 544: 516: 513: 508: 505: 488:Treynor ratios 444: 443:Use in finance 441: 403: 399: 386:expected value 373: 368: 364: 360: 355: 351: 347: 344: 314: 310: 287: 283: 271: 270: 259: 253: 248: 244: 240: 235: 231: 227: 223: 220: 217: 211: 206: 202: 198: 193: 189: 185: 182: 176: 169: 165: 160: 155: 151: 147: 142: 138: 134: 131: 125: 120: 116: 94: 91: 62:compared to a 44:Sharpe measure 26: 24: 14: 13: 10: 9: 6: 4: 3: 2: 2912: 2901: 2898: 2896: 2893: 2891: 2888: 2886: 2883: 2882: 2880: 2865: 2862: 2859: 2856: 2854: 2851: 2848: 2845: 2843: 2840: 2837: 2834: 2831: 2828: 2825: 2822: 2819: 2816: 2813: 2810: 2807: 2804: 2801: 2798: 2795: 2792: 2790: 2789:Profit margin 2787: 2784: 2781: 2778: 2775: 2772: 2769: 2766: 2763: 2760: 2757: 2754: 2753:Price-to-book 2751: 2749: 2746: 2744: 2741: 2738: 2737:Loan-to-value 2735: 2732: 2729: 2726: 2723: 2720: 2717: 2714: 2711: 2709: 2706: 2704: 2701: 2698: 2695: 2692: 2689: 2686: 2683: 2680: 2677: 2675: 2672: 2671: 2668: 2664: 2657: 2652: 2650: 2645: 2643: 2638: 2637: 2634: 2622: 2619: 2617: 2614: 2612: 2609: 2608: 2605: 2599: 2596: 2594: 2593:Systemic risk 2591: 2589: 2586: 2584: 2581: 2579: 2576: 2574: 2571: 2569: 2566: 2564: 2561: 2559: 2556: 2554: 2551: 2549: 2546: 2544: 2541: 2539: 2536: 2534: 2531: 2529: 2526: 2524: 2521: 2519: 2516: 2514: 2511: 2509: 2506: 2504: 2501: 2499: 2496: 2492: 2489: 2487: 2484: 2482: 2479: 2477: 2474: 2472: 2469: 2467: 2464: 2462: 2459: 2457: 2454: 2452: 2449: 2447: 2444: 2443: 2442: 2439: 2437: 2434: 2432: 2429: 2427: 2424: 2422: 2419: 2417: 2414: 2412: 2409: 2407: 2404: 2402: 2399: 2397: 2394: 2392: 2391:Capital asset 2389: 2387: 2384: 2382: 2381:Asset pricing 2379: 2377: 2374: 2372: 2369: 2368: 2366: 2362: 2355: 2351: 2347: 2343: 2339: 2335: 2332: 2330: 2327: 2324: 2320: 2317: 2315: 2314:Sortino ratio 2312: 2310: 2307: 2305: 2302: 2300: 2297: 2295: 2292: 2290: 2287: 2285: 2282: 2280: 2277: 2275: 2272: 2270: 2267: 2265: 2262: 2260: 2257: 2255: 2252: 2250: 2247: 2245: 2242: 2240: 2237: 2235: 2232: 2231: 2229: 2227: 2223: 2213: 2210: 2208: 2207:Systemic risk 2205: 2203: 2200: 2198: 2195: 2194: 2192: 2188: 2182: 2179: 2177: 2174: 2172: 2169: 2167: 2164: 2162: 2159: 2157: 2156:Business risk 2154: 2152: 2149: 2148: 2146: 2144: 2140: 2133: 2129: 2125: 2122: 2120: 2117: 2115: 2112: 2110: 2107: 2105: 2102: 2100: 2097: 2095: 2092: 2090: 2087: 2084: 2080: 2076: 2072: 2068: 2064: 2061: 2060: 2058: 2056: 2052: 2046: 2043: 2041: 2038: 2036: 2033: 2031: 2028: 2026: 2023: 2021: 2018: 2016: 2013: 2012: 2010: 2008: 2004: 2001: 1997: 1993: 1989: 1982: 1977: 1975: 1970: 1968: 1963: 1962: 1959: 1952: 1949: 1946: 1943: 1940: 1937: 1933: 1929: 1926: 1923: 1921: 1918: 1916: 1913: 1912: 1908: 1901: 1900: 1893: 1884: 1883: 1876: 1874: 1870: 1866: 1862: 1860: 1859:0-471-26849-6 1856: 1852: 1848: 1846: 1842: 1838: 1834: 1832: 1828: 1827: 1823: 1814: 1813: 1805: 1802: 1799: 1793: 1790: 1787: 1781: 1778: 1773: 1769: 1762: 1759: 1754: 1748: 1744: 1739: 1738: 1729: 1726: 1714: 1708: 1705: 1700: 1696: 1692: 1688: 1684: 1680: 1673: 1670: 1665: 1661: 1657: 1653: 1649: 1645: 1638: 1635: 1630: 1626: 1622: 1618: 1613: 1608: 1604: 1600: 1593: 1590: 1585: 1581: 1577: 1573: 1569: 1565: 1558: 1555: 1552: 1547: 1544: 1539: 1535: 1531: 1527: 1523: 1519: 1515: 1511: 1507: 1500: 1497: 1492: 1485: 1482: 1470: 1466: 1461: 1456: 1452: 1448: 1444: 1437: 1434: 1429: 1425: 1421: 1417: 1410: 1408: 1404: 1397: 1393: 1390: 1388: 1385: 1383: 1380: 1378: 1377:Treynor ratio 1375: 1373: 1370: 1368: 1367:Sortino ratio 1365: 1363: 1360: 1358: 1355: 1353: 1350: 1348: 1345: 1343: 1340: 1338: 1335: 1333: 1330: 1328: 1325: 1323: 1320: 1318: 1315: 1313: 1310: 1308: 1305: 1303: 1300: 1299: 1295: 1293: 1289: 1286: 1282: 1278: 1275: 1266: 1264: 1261: 1258: 1253: 1237: 1233: 1228: 1224: 1216: 1212: 1196: 1192: 1188: 1166: 1160: 1156: 1136: 1116: 1094: 1088: 1084: 1076: 1060: 1056: 1052: 1043: 1041: 1037: 1033: 1029: 1025: 1020: 1018: 1014: 1010: 1009:Treynor ratio 1005: 1003: 999: 993: 991: 987: 978: 976: 963: 960: 955: 951: 948: 945: 933: 930: 929: 925: 912: 909: 904: 901: 896: 889: 885: 878: 874: 870: 865: 861: 849: 848:excess return 843: 842: 835: 833: 816: 808: 789: 779: 775: 771: 768: 745: 744: 743: 727: 723: 699: 688: 684: 680: 677: 653: 649: 645: 642: 636: 630: 627: 620: 619: 618: 601: 592: 568: 564: 560: 557: 551: 545: 542: 535: 534: 533: 530: 525: 523: 522:Sortino ratio 514: 512: 506: 504: 501: 497: 493: 489: 484: 482: 477: 475: 471: 465: 462: 458: 457:Ponzi schemes 454: 449: 442: 440: 438: 433: 431: 426: 424: 420: 401: 397: 387: 366: 362: 358: 353: 349: 342: 334: 330: 312: 308: 285: 281: 257: 246: 242: 238: 233: 229: 204: 200: 196: 191: 187: 180: 174: 167: 163: 153: 149: 145: 140: 136: 129: 123: 118: 114: 106: 105: 104: 102: 101: 92: 90: 88: 84: 79: 77: 73: 69: 65: 61: 57: 53: 49: 45: 41: 37: 33: 19: 2841: 2548:Moral hazard 2533:Risk of ruin 2309:Sharpe ratio 2308: 2171:Country risk 2132:Deposit risk 2030:Default risk 1898: 1881: 1864: 1850: 1836: 1811: 1804: 1792: 1780: 1771: 1767: 1761: 1736: 1728: 1716:. Retrieved 1707: 1682: 1678: 1672: 1647: 1644:Econometrica 1643: 1637: 1602: 1599:Econometrica 1598: 1592: 1567: 1563: 1557: 1546: 1516:(1): 63–98. 1513: 1509: 1499: 1490: 1484: 1472:. Retrieved 1453:(1): 49–58. 1450: 1446: 1436: 1419: 1415: 1307:Calmar ratio 1290: 1279: 1273: 1270: 1262: 1254: 1214: 1074: 1044: 1040:distribution 1032:fatter tails 1021: 1006: 994: 982: 934: 931: 927: 926: 844: 840: 839: 831: 714: 616: 526: 518: 510: 485: 481:with-profits 478: 466: 450: 446: 434: 429: 427: 272: 98: 96: 80: 47: 43: 40:Sharpe index 39: 36:Sharpe ratio 35: 29: 2836:Risk return 2783:Price-sales 2721:(EV/EBITDA) 2598:Toxic asset 2558:Speculation 2491:social work 2476:engineering 2304:Risk parity 2289:Omega ratio 2202:Profit risk 2089:Equity risk 2067:Volume risk 2055:Market risk 2007:Credit risk 1347:Omega ratio 498:managers. 496:mutual fund 474:flash crash 461:put options 423:t-statistic 331:(such as a 2879:Categories 2733:(EV/Sales) 2687:(Cap Rate) 2181:Legal risk 2161:Model risk 2075:Shape risk 2071:Basis risk 1999:Categories 1398:References 1302:Bias ratio 1007:While the 998:bias ratio 986:volatility 93:Definition 54:such as a 52:investment 46:, and the 2528:Risk pool 2441:Financial 1718:March 14, 1699:154908707 1607:CiteSeerX 1530:0893-9454 1234:σ 1225:μ 1137:σ 1117:μ 1061:σ 1053:μ 949:− 928:Example 2 886:σ 871:− 841:Example 1 772:− 715:Note, if 681:− 646:− 561:− 527:In 1966, 398:σ 359:− 239:− 197:− 164:σ 146:− 60:portfolio 2727:(EV/GCI) 2451:analysis 2386:Bad debt 2264:Drawdown 2226:Modeling 1474:June 12, 1469:55394403 1387:V2 ratio 1296:See also 1036:skewness 1028:kurtosis 836:Examples 56:security 2864:Treynor 2853:Sortino 2832:(RAROC) 2693:(CROCI) 2466:betting 2456:analyst 2446:adviser 2099:FX risk 1664:1907413 1629:1913625 1584:2327554 1538:1262669 1392:Z score 1038:on the 515:History 430:ex-post 417:is the 384:is the 327:is the 100:ex-ante 32:finance 2842:Sharpe 2826:(ROTE) 2814:(ROCE) 2802:(RONA) 2767:(P/CF) 2761:(PVGO) 2681:(CAPE) 2508:Hazard 2259:Copula 2126:(e.g. 2065:(e.g. 1871:  1857:  1843:  1835:Bacon 1749:  1745:–432. 1697:  1662:  1627:  1609:  1582:  1536:  1528:  1467:  273:where 42:, the 34:, the 2860:(SGR) 2849:(SIR) 2838:(RRR) 2820:(ROE) 2808:(ROC) 2796:(ROA) 2785:(P/S) 2779:(PEG) 2773:(P/E) 2755:(P/B) 2743:Omega 2739:(LTV) 2715:(E/P) 2699:(D/E) 2513:Hedge 2471:crime 2461:asset 2294:RAROC 2190:Other 1886:(PDF) 1695:S2CID 1660:JSTOR 1625:JSTOR 1580:JSTOR 1534:JSTOR 1465:S2CID 1213:is a 1073:is a 507:Tests 2523:Risk 2486:risk 1990:and 1869:ISBN 1855:ISBN 1841:ISBN 1774:(4). 1747:ISBN 1720:2011 1526:ISSN 1476:2012 1181:and 1000:and 952:0.05 946:0.12 905:0.10 902:0.15 490:and 435:The 428:The 335:). 87:1966 68:risk 2481:law 2426:ESG 1743:429 1687:doi 1652:doi 1617:doi 1572:doi 1518:doi 1455:doi 1424:doi 964:0.7 956:0.1 913:1.5 476:). 58:or 30:In 2881:: 2352:, 2348:, 2344:, 2340:, 2130:, 2081:, 2077:, 2073:, 2069:, 1772:58 1770:. 1693:. 1681:. 1658:. 1648:20 1646:. 1623:. 1615:. 1603:57 1601:. 1578:. 1568:36 1566:. 1532:. 1524:. 1514:17 1512:. 1508:. 1463:. 1451:21 1449:. 1445:. 1420:39 1418:. 1406:^ 1030:, 992:. 89:. 2655:e 2648:t 2641:v 2356:) 2325:) 2321:( 2134:) 2085:) 1980:e 1973:t 1966:v 1890:. 1755:. 1722:. 1701:. 1689:: 1683:7 1666:. 1654:: 1631:. 1619:: 1586:. 1574:: 1540:. 1520:: 1493:. 1478:. 1457:: 1430:. 1426:: 1238:2 1229:/ 1197:T 1193:/ 1189:1 1167:T 1161:/ 1157:1 1095:T 1089:/ 1085:1 1057:/ 961:= 910:= 897:= 890:a 879:f 875:R 866:a 862:R 817:. 812:] 809:R 806:[ 802:r 799:a 796:v 790:= 785:] 780:f 776:R 769:R 766:[ 762:r 759:a 756:v 728:f 724:R 700:. 694:] 689:b 685:R 678:R 675:[ 671:r 668:a 665:v 659:] 654:b 650:R 643:R 640:[ 637:E 631:= 628:S 602:. 596:] 593:R 590:[ 586:r 583:a 580:v 574:] 569:f 565:R 558:R 555:[ 552:E 546:= 543:S 402:a 372:] 367:b 363:R 354:a 350:R 346:[ 343:E 313:b 309:R 286:a 282:R 258:, 252:] 247:b 243:R 234:a 230:R 226:[ 222:r 219:a 216:v 210:] 205:b 201:R 192:a 188:R 184:[ 181:E 175:= 168:a 159:] 154:b 150:R 141:a 137:R 133:[ 130:E 124:= 119:a 115:S 20:)

Index

Market price of risk
finance
investment
security
portfolio
risk-free asset
risk
risk-free return
standard deviation
William F. Sharpe
1966
ex-ante
risk-free return
U.S. Treasury security
expected value
standard deviation
t-statistic
information ratio
not normally distributed
Ponzi schemes
put options
high-frequency trading
flash crash
with-profits
Treynor ratios
Jensen's alphas
mutual fund
Berkshire Hathaway
Sortino ratio
William F. Sharpe

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