The Sharpe Ratio

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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[patricialim]

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

[nowfeleusuf]

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This channel is like maximum learning per time spent, the McLaughlin ratio :)

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[ethans]

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

[vapa]

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[kaiguo]

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

[kasbiia]

your videos have been so helpful over the semesters thank you so much!

[Tiberius_Gracchus]

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

[AlaraDincYT]

as always... an amazing video! thank you

[adokoka]

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

[maxmudbekmurodov]

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

[grodrigues]

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?

[juanochoa]

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

[coachgeflores]

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

[luca]

But if at the denominator we have the standard deviation, doesn't the Sharpe ratio penalizes the upward volatility as well ? Which is not desirable? Or it is based upon all volatility will imply sooner or later the same in the oposite direction, hence it's bad ?