What does the Sharpe ratio mean in a fund, and why the higher the Sharpe ratio, the better when choo

Sharpe ratio. It is also known as the Sharpe index - a standardized indicator of performance evaluation. The study of the Sharpe ratio in modern investment theory shows that the magnitude of risk plays a fundamental role in determining the performance of a portfolio.

Risk-adjusted return is a composite indicator that can consider both return and risk in order to exclude risk factors for performance evaluation.

adverse effects. The Sharpe ratio is one of the three classic indicators that can be used to consider both return and risk. There is a conventional feature in investment, that is, the higher the expected return of the investment target, the higher the volatility risk that the investor can tolerate; Conversely, the lower the expected return, the lower the volatility risk.

Therefore, the main purpose of rational investors in choosing investment targets and portfolios is: to pursue the maximum return under the fixed risk they can bear; Or pursue the lowest risk with a fixed expected reward.

Extended Materials. What is the average Sharpe ratio? The Sharpe ratio has become one of the most commonly used indicators to measure performance, and the Sharpe ratio is the excess return generated by each unit of risk, which is similar to the common cost performance in daily life.

Calculation formula: Sharpe ratio calculation formula: =[e(rp)-rf] p

where E (RP): Expected rate of return on the portfolio.

RF: Risk-Free Rate.

p: Standard deviation of the portfolio.

The larger the Sharpe ratio, the larger the Sharpe ratio value, the higher the return that can be obtained by the risk taken, and the smaller the Sharpe ratio value, the smaller the return that can be obtained by the risk taken, when the Sharpe ratio is negative, there is no reference meaning.

The Sharpe ratio measures the return relative to the risk-free rate, with Sharpe ratio = (annualized return.

Risk-free rate) Annualized volatility of the portfolio.

When using the Sharpe ratio to select, we should pay attention to several issues: 1. The Sharpe ratio is not an isolated indicator, and it should be compared with the horizontal combination ratio of other indicators; Vertically, comparisons should be made among the multitude, which means that when faced with a dilemma in the selection pool, the Sharpe ratio can be used to select the target. 2. Treat the Sharpe ratio as pure debt**.

And **** is meaningless. Keep in mind that there are two elements to the Sharpe ratio, one is the expected return and the other is the risk. The high Sharpe ratio of pure debt** is due to its extremely low risk, but this is the case with yields.

If you want to get high returns, you have to take some risks. 3. In addition, the Sharpe ratio, like other indicators, measures the historical performance of **, so it cannot be used to judge its future performance. The higher the Sharpe ratio when selecting **, the better, when the same type ** and other conditions are similar.

The Sharpe ratio is a measure of a portfolio's risk-adjusted returns. It was proposed by Nobel laureate economist William Sharp to evaluate the performance of a portfolio. The Sharpe ratio measures a portfolio's risk-adjusted return by dividing the portfolio's excess return (i.e., portfolio return minus risk-free return) by the portfolio's volatility (standard deviation).

A higher Sharpe ratio means a higher return for the portfolio if it takes on a unit of risk. This means that the return of the portfolio is superior relative to its risk. The Sharpe ratio can help investors assess the risks and returns of different portfolios and choose the most suitable one.

It is important to note that the Sharpe ratio only considers the volatility and return of the portfolio, and does not take into account other factors such as market conditions, investment strategies, etc. Therefore, when using the Sharpe ratio, there are other factors that need to be considered in combination to make a more comprehensive investment decision.

A higher Sharpe ratio indicates a higher return. To choose a good one, you must look at three major indicators: drawdown rate, annualized rate of return, and Sharpe ratio.

The Sharpe ratio is the price-performance ratio of risk to return. The Sharpe ratio refers to risk-adjusted excess returns. The Sharpe ratio is obtained by the average of the net worth growth rate minus the risk-free rate and divided by the standard deviation of the net worth growth rate.

It is calculated as: Sharpe Ratio = (Annualized Return - Risk-Free Rate) Annualized Volatility of the Portfolio.

For example, the net value curve of manager A is relatively stable, the income curve is steadily rising, the ** fluctuation of manager B is relatively large, the risk tolerance of manager B is higher, and the return of **net value obtained by unit risk will be small. The core idea of the Sharpe ratio is that rational investors expect the portfolio with the greatest return and the least risky portfolio, with the least risk cost in exchange for the greatest possible return.

Under the same return, the smaller the risk, the better, in this case, the higher the Sharpe ratio, the larger the Sharpe ratio, the higher the risk-return obtained by the unit risk of **.

Extended information: Drawdown market refers to the decrease in net value when the net value of the unit falls from the highest value to the lowest value in a specific period. To put it simply, the drawdown rate is the maximum decline in the stage, and it also means that investors should face the largest loss.

Broadly speaking, there are three main reasons for the drawdown:

First, it fluctuates with the volatility of the market. Any investment in the market is in a state of fluctuation, and ** is no exception. The net unit value of the type is strongly correlated with market volatility, and when it falls, there will be a drawdown.

Second, poor performance causes drawdowns. There are also some ** on the market, ** drawdown rate far exceeds the market, more than the same kind of ** performance, which is inseparable from its own operation.

In fact, buying ** is to pick ** manager, excellent ** manager has the ability to maintain the stability of **net worth as much as possible in the volatile market, while bad ** manager chases the rise and fall in the market, resulting in poor performance and obvious drawdown.

Third, a black swan event triggers a drawdown. In the investment market, there are often some backfires, and these situations can be called black swan events.

These events can trigger a strong reaction in the market, which in turn can lead to a sharp drawdown of the NAV of the unit. For example, the melamine incident in 2008 completely changed the market structure of the domestic dairy industry, which is difficult to prevent and avoid. This kind of fermentation will also lead to a drawdown of the net value of the unit.

The core idea of the Sharpe ratio is that rational investors will choose a portfolio with the largest expected return at a certain level of risk; Or at a certain level of expected return, the least risky portfolio, where we want to get the greatest possible return at the least possible risk cost.

In a word, the less risk the better, and the higher the Sharpe ratio in this case, the lower the risk.

The Sharpe Ratio is a measure of portfolio risk and return, and is often used to evaluate a manager's investment performance. The Sharpe ratio is the ratio of the average excess return of the portfolio over the risk-free rate of return to the volatility of the excess return of the portfolio, and its formula is (RP - RF) P, where RP is the return on the excess of the portfolio, RF is the risk-free rate, and P is the standard deviation of the excess return of the portfolio. The higher the Sharpe ratio, the higher the excess return created by the unit excess risk, and vice versa.

When making ** investment, everyone will pay too much attention to the ** rate of return, can you make money? How much money can I make? The level of risk is often overlooked.

I believe that many students have seen the Sharpe ratio when choosing **, but they don't particularly understand it, they only know that the higher the better, what does it really represent?

In fact, the Sharpe ratio is a measure of the relationship between risk and return.

Seeing this, some students may be curious, is the higher the Sharpe ratio, the better?

Indeed, theoretically, the higher the value of the Sharpe ratio, the better.

However, it should be noted that there is no fixed benchmark point for the Sharpe ratio, and the Sharpe ratio of **type** is generally between, while the debt base and the commodity gene are relatively higher because of the small drawdown.

Therefore, its size in itself is meaningless and is only valuable in comparison with other similar products.

For example, the two **ticket types** are both annualized returns of 20%, and the larger the Sharpe ratio, the better.

So the question is, is the Sharpe ratio a panacea?

Generally speaking, the Sharpe ratio will set a certain calculation interval, one year, three years or five years, etc., different calculation intervals, the calculated ratios will be very different, just like everyone commonly uses to see the Sharpe ratio data**such as every day** and Morningstar.com, although the calculation formula is fixed, but the calculation caliber of the two is not consistent.

Every day** is usually displayed in the past year, and Morningstar shows in the past three years and five years, and because the two ** do not specifically explain how they calculate the data, so when making a comparison, we should not compare the data provided by Morningstar with the data provided by Morningstar.

At the same time, if the selected calculation time interval is exactly when the ** rises, the calculated Sharpe index will look good, and on the contrary, when the ** falls sharply, the calculated data will be ugly.

Moreover, the two different **, due to different investment styles and holding stocks, will explode in different time periods, so that the Sharpe ratio of the two ** is not very comparable. Therefore, it is best to choose a time period when the performance of the two ** is relatively stable, otherwise it will be difficult to reflect the real situation, so it seems that the Sharpe ratio still has certain limitations.

In addition, the Sharpe ratio measures the historical performance of **, which is an important reference, and cannot simply be based on **historical performance for future operations.

So how exactly should the Sharpe ratio be used?

Here it is suggested that you may wish to start with the best company, scale, past performance, manager stock selection and timing ability, etc., to find a few products with excellent quality, and then use the Sharpe ratio to assist our investment decisions when you are entangled, and choose the one with a relatively high Sharpe ratio.

The Sharpe ratio measures the risk-reward ratio, i.e., how much excess return can be generated for each unit of total risk compared to the risk-free rate. Therefore, the larger the Sharpe ratio, the better the return-risk performance of **. Sharpe Ratio = (Annualized Rate of Return - Risk-Free Rate) Annualized Volatility.

For example, if a has a Sharpe ratio of , and the average Sharpe ratio of the same type is , it means that the risk-reward performance of a is better than the average of the same type.

The Sharpe ratio is a standardized indicator of performance evaluation, and it is one of the three classic indicators that can comprehensively consider both benefits and risks. The higher the Sharpe ratio, the higher the risk-reward per unit of risk.

I guess it's the Sharpe coefficient, right? The Sharpe coefficient is obtained by subtracting the risk-free rate from the average of the net worth growth rate and dividing it by the standard deviation of the net worth growth rate. For example, if the yield of a ** is 25 and the standard deviation is 10, and the yield of the 90-day Treasury bond is 5, then the Sharpe coefficient is.

It reflects the extent to which the growth rate of net value per unit of risk** exceeds the risk-free rate of return. If the Sharpe ratio is positive, it means that the average net worth growth rate** exceeded the risk-free rate during the measurement period, and the investment** is better than bank deposits (Treasury bonds) when the bank deposit (or treasury) interest rate is used as the risk-free rate for the same period.

The Sharpe ratio is a measure of the efficiency of the risk-return exchange.

What it means: In 1966, William Sharpe proposed a risk-adjusted measure of performance based on the Capital Asset Pricing Model (CAPM), known as the Sharpe Ratio (SP). SP is the average excess return of a portfolio over a period divided by the standard deviation of the return over that period.

Calculated by formula: sp = (average rate of return - risk-free rate of return) **Standard deviation of the rate of return Sharpe arm bar is a measure of total risk-adjusted return. The higher the Sharpe ratio, the higher the excess return per unit of total risk.

The Sharpe ratio is a standardized indicator of performance evaluation, which is one of the three classic indicators that can comprehensively consider the expected return and risk at the same time.

The Sharpe ratio is calculated as =[e(rp) rf] p. where E (RP): Expected rate of return on the portfolio. RF: Risk-Free Rate. p: Standard deviation of the portfolio.

The Sharpe ratio of acres reflects the extent to which the growth rate of net value per unit of risk exceeds the risk-free expected rate of return. A positive Sharpe ratio indicates that the average net worth growth rate of ** over the measurement period exceeded the risk-free rate, indicating that investment** is better than bank deposits when the bank deposit rate is used as the risk-free rate for the same period. The larger the Sharpe ratio, the higher the risk-return per unit of risk.