The Sharpe Ratio

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The Sharpe Ratio

Рет қаралды 136,324

Күн бұрын

This video shows how to calculate the Sharpe Ratio.
The Sharpe Ratio measures the reward (excess return) to risk (volatility) of a portfolio. This allows investors to rank portfolios. The Sharpe Ratio is calculated as follows:
Sharpe Ratio = Excess Return of Portfolio / Volatility of Portfolio
The excess return of a portfolio is the expected return of a portfolio minus the risk-free rate.
The Sharpe Ratio is also the number of standard deviations by which the portfolio's return must fall to underperform the risk-free investment.-
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Пікірлер: 56

@patricialim6816 5 жыл бұрын

Probably the most simple explanation of this investment formula. Everyone else out there makes it sound like calculus... thank you!

@nowfeleusuf2294 5 жыл бұрын

You are the best finance teacher ever. I only see your video ONCE and I get it all.

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@allisonfabian7798 3 жыл бұрын

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@mariahclaire1256 3 жыл бұрын

Well explained video sir.

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@dontwannabefound Жыл бұрын

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@danielseraphin9982 2 жыл бұрын

This guy really hits the nail on the head with most of his videos. Salut you sir.

@Edspira 2 жыл бұрын

Thank you!

@InvestOrama 3 жыл бұрын

What an amazing channel! So much teaching available for free (except a few seconds of our time spent watching ads)

@Edspira 3 жыл бұрын

Glad you enjoy it!

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@ethans7917 4 жыл бұрын

I’m still in high school but I just find finance so interesting! Thank you for ur explanation

@joshuafancher3111 5 жыл бұрын

Thank you. Thoroughly explained.

@kaiguo3907 5 жыл бұрын

Thank you for sharing such a helpful interpretation of sharp ratio, I am so excited to see more videos from you.

@AlaraDincYT 3 жыл бұрын

as always... an amazing video! thank you

@vapa5761 5 жыл бұрын

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@kasbiia 5 жыл бұрын

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@grodrigues3 25 күн бұрын

Didn't watch the video on efficient portfolio's but based on the graph, it looks like the purple part is efficient because taking on more risk yields BETTER reward and and the yellow part is where taking on more risk yields WORSE rewards. Does the yellow section all have a negative sharpe ratio?

@joannaortiz9015 3 жыл бұрын

I understand it now! Thank you!!!

@Tiberius_Gracchus 3 жыл бұрын

Great video, you are a gifted teacher, keep up the good work!

@the_freedom_quest 2 жыл бұрын

Thank you so much

@Edspira 2 жыл бұрын

You're most welcome

@megawarpig3401 8 ай бұрын

So the portfolio of risky assets tangent to the CML has the highest Sharpe Ratio. But all the portfolio on the CML have the same Sharpe Ratio, since the slope of the CML is the Sharpe Ratio, correct? And the points on the CML can be obtained by a combination of the risk-free asset and the tangent portfolio of risky assets, right?

@lukashuber389 3 жыл бұрын

great video!!

@maxmudbekmurodov6938 5 жыл бұрын

The most comprehensive video on youtube) would be even better if you include some specific examples ! Thank you anyway)

@adokoka 4 жыл бұрын

Very clear explanation. Could you please make a video on the sortino ratio? Many thanks in advance!

@Kirmo13 3 ай бұрын

why is volatility equal to risk?

@irinascott2941 Жыл бұрын

So how do u calculate the market portfolio?

@hazirahashim1904 3 жыл бұрын

volatility does not equal risk. volatility is how much the data disperses from the expected value. risk is the probability that the investor deviates from their expected return. Variance measures volatility & not risk. One of the measures of risk is Standard Deviation.

@Discovery_and_Change 9 ай бұрын

Where do we find the volatility of an ETF? What's it called? Is it labeled as 'volatility' or 'beta' ?

@samamdrews8076 Ай бұрын

what if the portfolio is a short portfolio?

@wolfgangi 4 жыл бұрын

what do we mean by underperform in this context? My understanding of the written definition is that how many SD (risk) the portfolio must decrease in order to achieve the most optimal portfolio ( the portfolio tangent to the CML) ?? Is this the correct understanding???

@milzijex7340 4 жыл бұрын

Wolfgang Icarus, No - in his example if portfolio falls by 0.5 sd then it will underperform the risk free rate

@horangi1609 Жыл бұрын

Hii is this the same as the market price of risk?

@juanochoa3972 4 жыл бұрын

Thank you so much for the explanation. Do you have an excel sheet as an example. With daily data?. Rgds and thanks!

@coachgeflores 3 жыл бұрын

Very informative video. Are you using Geometric or Arithmetic Rates of Return and Standard Deviations?

@douglashurd4356 2 жыл бұрын

How can the dividend yield rate be included in the calculation? Is it reasonable to say S = (rtn + div yield - risk free) / stddev(rtn) ???

@irinascott2941 Жыл бұрын

Is market portfolio the same as tangency portfolio? Plz reply I have an exam on Monday

@Rushmanism 2 жыл бұрын

Great video - Can anyone tell me why my best-performing stock has the worst sharpe ratio at-52% ( this is based on just 1 stock and its SD and ER not a portfolio).

@josephmandarino2199 Жыл бұрын

Sharp ratio doesn't really work on a single stock

@Jupiter1423 2 жыл бұрын

Never agreed with the cml being the portfolio of rationality. As warren buffet said - divsersification is for people who dont know how to invest. Thered nothing irrational about taking on more risk if you can manage it... hedging comes big into this.

@Blank-yc9hm 4 жыл бұрын

risk free investion means less risk