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 options are correct.

Question

Quizplus · Accepted Answer

The Sharpe measure, also known as the Sharpe ratio, quantifies the performance of an investment compared to a risk-free asset, after adjusting for its risk. It is calculated by dividing the difference between the returns of the investment and the risk-free return by the standard deviation of the investment returns, thus directly measuring the reward to volatility trade-off.

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