The __________ measures the reward to volatility trade-off by dividing the average portfolio excess return by the standard deviation of returns.
A)Sharpe measure
B)Treynor measure
C)Jensen measure
D)information ratio
E)none of the above

Question

Quizplus · Accepted Answer

The Sharpe measure was developed by William Sharpe to measure the risk-adjusted performance of a portfolio. It calculates the excess return of a portfolio over the risk-free rate, and divides it by the standard deviation of the portfolio returns, which measures the volatility of those returns. The Sharpe measure indicates how much excess return an investor is receiving for the level of risk taken, and helps to determine whether a portfolio's returns are due to good investment decisions or simply a result of excess risk.

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