To increase the Sharpe ratio for a portfolio,an investor would have to add which one of the following?

Question

Quizplus · Accepted Answer

Sharpe ratio is a measure of risk-adjusted return, where a higher ratio indicates a better return per unit of risk taken. In order to increase the Sharpe ratio, an investor would have to increase the expected return of the portfolio, while not increasing the risk or volatility by the same proportion. Adding stocks that increase the expected return would achieve this objective. Therefore, choice A is the correct answer. Adding stocks that decrease expected return (B), increase volatility (C), or increase correlation with other stocks in the portfolio (D) will not necessarily increase the Sharpe ratio.

To Increase the Sharpe Ratio for a Portfolio,an Investor Would