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Sharpe Ratio (Annualised)
By Martin | December 18, 2007
The Sharpe Ratio measures a fund’s return in excess of the risk free rate for a given period and divides this by the standard deviation of those returns. The Sharpe Ratio is a measure of how effectively a fundutilises risk. This means that the higher a fund’s Sharpe Ratio the better the fund’s historical risk-adjusted performance.
Formula:
Where:
μ annual = Annualised Average fund return
σ annual = Annualised Standard Deviation of returns
R f = Annual Risk Free Rate
Topics: Glossar |
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