Sharpe Ratio

The Sharpe Ratio is equal to compound annual rate of return minus rate of return on a risk-free investment divided by the annualized monthly standard deviation.

Formula: (Compound Annual ROR - risk free ROR (calculated from T-bills)) / Annualized Std. Dev. of Mo. ROR or Annualized Std. Dev. of Quarterly ROR

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Related Terms:

• Macro definition
• Fixed Income Diversified definition
• Average Recovery Time ART definition
• Market Timing definition
• Barclay Ratio definition

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