Select the correct statement about Sharpe's reward-to-variability ratio (RVAR).
A) RVAR is an absolute measure of performance.
B) RVAR measures the slope of the line from RF to the portfolio being evaluated.
C) The closer the RVAR to 0.0, the better is the performance.
D) RVAR does not take into account how well diversified a portfolio was.

Question

Quizplus · Accepted Answer

RVAR, also known as the Sharpe Ratio, measures the excess return per unit of risk of a portfolio. It is calculated as the slope of the line from the risk-free rate (RF) to the portfolio point on a risk-return graph, indicating how much excess return is received for the extra volatility of holding a riskier asset over a risk-free asset.

Select the Correct Statement About Sharpe's Reward-To-Variability Ratio (RVAR)