It is two minutes before finance class starts and you just remembered you were supposed to have your stock recommendation for class today. You quickly pull out the information and notice that Stock 1 has a Sharpe ratio of 0.38, Stock 2 has a Sharpe ratio of 0.25, Stock 3 has a Sharpe ratio of 0.33 and Stock 4 has a Sharpe ratio of 0.18. Which stock are you going to choose for your class recommendation?
A) Stock 1
B) Stock 2
C) Stock 3
D) Stock 4

Question

Quizplus · Accepted Answer

The Sharpe ratio measures the performance of an investment compared to a risk-free asset, after adjusting for its risk. A higher Sharpe ratio indicates a more attractive risk-adjusted return. Therefore, Stock 1, with the highest Sharpe ratio of 0.38, would be the best recommendation.

It Is Two Minutes Before Finance Class Starts and You