The __________ measures the reward to volatility trade-off by dividing the average portfolio excess return by the standard deviation of returns.

Question

Quizplus · Accepted Answer

The Sharpe measure is a ratio that helps investors understand the return of an investment compared to its risk. It measures the reward to volatility trade-off by dividing the average portfolio excess return (return above the risk-free rate) by the standard deviation of returns. The higher the Sharpe ratio, the better the risk-adjusted performance of the investment. The other options (B, C, D) are also performance measures, but they do not specifically measure the reward to volatility trade-off like the Sharpe measure does.

The __________ Measures the Reward to Volatility Trade-Off by Dividing