How is Sharpe ratio calculated
How is Sharpe ratio calculated?
Expert
Sharpe ratio is calculated as:
Sharpe ratio = (µ − r)/σ
Here µ is the return on the strategy over some given period, r is the risk-free rate over such period and here σ is the standard deviation of returns. This Sharpe ratio will be quoted in annualized conditions. A high Sharpe ratio is intended to be an indication of a good strategy.
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