|
|
| 1번째 줄: |
1번째 줄: |
| '''Sharpe Ratio''' is a financial metric used to measure the risk-adjusted return of an investment. It helps investors understand how much excess return they are earning for the additional risk taken compared to a risk-free asset.
| | #REDIRECT [[Sharpe Ratio]] |
| ==Definition==
| |
| The Sharpe Ratio is calculated as:
| |
| *Sharpe Ratio = (R_p - R_f) / σ_p
| |
| where:
| |
| *'''R_p''' – Return of the portfolio.
| |
| *'''R_f''' – Risk-free rate (e.g., U.S. Treasury rate).
| |
| *'''σ_p''' – Standard deviation of the portfolio's return (risk).
| |
| ==Interpretation==
| |
| *'''Sharpe Ratio greater than 1''' – Indicates a good risk-adjusted return.
| |
| *'''Sharpe Ratio between 0 and 1''' – Suggests that returns may not be significantly better than the risk-free rate.
| |
| *'''Negative Sharpe Ratio''' – The investment underperforms compared to the risk-free rate.
| |
| ==Example Calculation==
| |
| Suppose:
| |
| *Portfolio return (R_p) = 12%
| |
| *Risk-free rate (R_f) = 3%
| |
| *Portfolio standard deviation (σ_p) = 10%
| |
| The Sharpe Ratio is:
| |
| *(12% - 3%) / 10% = 0.9
| |
| ==Advantages==
| |
| *'''Compares different investments''' – Helps assess performance across assets.
| |
| *'''Considers risk''' – Accounts for volatility, unlike raw returns.
| |
| *'''Widely used''' – Standard benchmark in portfolio management.
| |
| ==Limitations==
| |
| *'''Assumes normal distribution''' – May not be accurate for highly skewed assets.
| |
| *'''Sensitive to inputs''' – Different risk-free rates or time periods can affect results.
| |
| *'''Does not capture downside risk separately''' – Unlike the Sortino Ratio.
| |
| ==Applications==
| |
| *Portfolio optimization in asset management.
| |
| *Comparing mutual funds, hedge funds, and ETFs.
| |
| *Evaluating risk-adjusted returns in quantitative finance.
| |
| ==Variations==
| |
| *'''Sortino Ratio''' – Focuses only on downside risk.
| |
| *'''Treynor Ratio''' – Uses beta instead of standard deviation.
| |
| ==See Also==
| |
| *[[Risk-Adjusted Return]]
| |
| *[[Sortino Ratio]]
| |
| *[[Treynor Ratio]]
| |
| *[[Volatility (Finance)]]
| |
| *[[Modern Portfolio Theory]]
| |
| *[[Efficient Frontier]]
| |
| [[Category:Finance]] | | [[Category:Finance]] |
