Comments on: Performance Ratios: The Sharpe Ratio and Beyond

By: calcinv

calcinv — Mon, 26 Sep 2011 12:27:32 +0000

In reply to Andrew. The standard deviation of the excess return of the asset or portfolio.

By: Andrew

Andrew — Mon, 26 Sep 2011 04:47:36 +0000

I have a question on Standard Deviation when using the Sharpe Ratio. That is, the Std Dev of what, exactly?

Is it the Std Dev of returns? Or Std Dev of the account value?

I assume it’s the Std Dev of the account value, but I’m finding it difficult to get confirmation anywhere. And it makes a HUGE difference to the final Sharpe ratio.

What is the standard? Any help would be appreciated…

By: Samir Khan

Samir Khan — Fri, 12 Aug 2011 11:28:45 +0000

I've started to use the Omega Ratio as my "go to" performance benchmark because it addressess the shortcomings of traditional benchmarks like the Sharpe or Sortino Ratio. For example, the Sharpe Ratio approximates the returns distribution with the mean and standard deviation, and assumes the returns follow a normal distribution. Its one primary advantage is that everyone uses it. The Omega Ratio effectively captures all of the information within the empirical returns distribution (and distinguishes between downside and upside risk). However, it's not as widely used as the Sharpe Ratio, so it's usually not given in mutual fund factsheets etc. I used the Omega Ratio Excel spreadsheet here to calculate the Omega Ratio myself.

By: Sim Con

Sim Con — Sat, 21 May 2011 03:09:21 +0000

I tend to use a mixture of the Sharpe and Sortino ratio to decide where to invest (and to backtest my portfolio). I hardly ever look at raw investment returns in isolation (they can be very misleading). There’s an Excel spreadsheet for calculating the Sharpe Ratio at http://optimizeyourportfolio.blogspot.com/2011/05/calculating-sharpe-ratio-with-excel.html

By: calcinv

calcinv — Thu, 14 Apr 2011 14:51:02 +0000

In reply to DIY Investor. Thanks, that is a good tip! I wasn't aware that Yahoo Finance provided the Sharpe ratio stats.

By: DIY Investor

DIY Investor — Thu, 14 Apr 2011 14:24:29 +0000

Excellent overview. One place to find the statistics is at Yahoo Finance. For example, put xle (energy etf) in the quote box. Scroll down and on the RHS find a link for “risk details”:

http://finance.yahoo.com/q/rk?s=XLE

Here you’ll find the Sharpe ratio based on various time spans of data and other metrics.