That led to the widespread use of the Sharpe ratio as a measurement tool.
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Sharpe, a professor emeritus at Stanford, invented the Sharpe Ratio for measuring the risk-adjusted performance of investments.
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The Sharpe ratio can help investors determine which fund is causing them to take on more risk.
Telecoms, consisting mostly of original issues, posted a -1.01% mean quarterly return and a -0.31 Sharpe Ratio.
Then he will look at the Sharpe ratio to see which funds are taking on outsize risk to get those returns.
Portfolio managers often use the eponymous Sharpe ratio to determine how much excess return they are producing per unit of risk.
That mixture of fallen angels and original issues just matched the return on three-month Treasuries, at 1.28%, resulting in a 0.00 Sharpe Ratio.
The report found strong evidence that involvement of financial advisors results in inferior risk-return trade-offs, as measured by the Sharpe ratio, regardless of advisory model.
Sharpe, the Stanford finance professor who devised the widely used Sharpe Ratio for measuring investment risk, recently took another looked at actively managed funds.
When used in conjunction with other measures, the Sharpe ratio can help investors develop a strategy that matches both their return needs and risk tolerance, advisers say.
But he said it is a different situation when one approaches asset class as a fundamental investment and add commodities to achieve a certain rate of return or Sharpe ratio.
For instance, a fund with an attractive Sharpe ratio over the past 10 years would have managed to bring in returns to compensate investors for the risk it took through the recession of the early 2000s, the subsequent boom years, the recession that started in 2008 and the volatility of last year.
Using Morningstar data, Sharpe found the average actively-managed U.S. stock fund had an expense ratio of 1.12 percent during 2012.
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