PerformanceAnalytics (version 0.9.5)

SharpeRatio: Sharpe Ratio

Description

The Sharpe Ratio is a risk-adjusted measure of return that uses standard deviation to represent risk.

Usage

SharpeRatio(Ra, rf = 0)

Arguments

Ra

a vector, matrix, data frame, timeSeries or zoo object of asset returns

rf

risk free rate, in same period as your returns

Value

• Sharpe Ratio

Details

The Sharpe ratio is simply the return per unit of risk (represented by variance). The higher the Sharpe Ratio, the better the combined performance of "risk" and return.

$$\frac{\overline{(R_{a}-R_{f})}}{\sqrt{\sigma}}$$

William Sharpe now recommends InformationRatio preferentially to the original Sharpe Ratio.

References

Sharpe, W.F. The Sharpe Ratio,Journal of Portfolio Management,Fall 1994, 49-58.

See Also

SharpeRatio.annualized InformationRatio TrackingError ActivePremium SortinoRatio

Examples

data(edhec)
head(edhec[, 6, drop = FALSE])
edhec.length = dim(edhec)[1]
start = rownames(edhec[1,])
start
end = rownames(edhec[edhec.length,])
rf = download.RiskFree(start=start, end=end)

SharpeRatio(edhec[, 6, drop = FALSE])
SharpeRatio(edhec[, 6, drop = FALSE], rf = .04/12)
SharpeRatio(edhec[, 6, drop = FALSE], rf = rf)