What is the exact definition of this ratio ? What is considered as less the average, average an above average ? What other ratio's are considered as im- portant in achieving a certain % performance in the Hedge Fund Business ? Regards, Virgin.
Virgin: âWhat is the exact definition of this ratio?â The Sharpe ratio can be calculated as the amount of: Excess Returns divided by the Annualized SD of Account Returns (ER / ASDAR) Where: ER = Annualized Account Return - Risk Free Return (AAR - RFR) RFR = A risk free investment such as a T-Bill There are more complex methods that may, for instance, alter the SD calculation or use projected returns.