How do you calculate the Sharpe ratio?

Hi there, I'm an expert in finance and I'd be happy to explain how to calculate the Sharpe ratio. The Sharpe ratio is a measure of the performance of an investment compared to a risk-free asset, after adjusting for its risk. It's calculated by using the average return of the investment minus the risk-free rate, divided by the standard deviation of the investment's returns. The standard deviation is a measure of the investment's volatility. Here's a step-by-step guide on how to calculate the Sharpe ratio: 1. Identify the Time Periods: Decide on the time periods you want to measure. This could be daily, monthly, or yearly returns. 2. Calculate the Excess Returns: For each time period, calculate the investment's return and subtract the risk-free rate. The risk-free rate is typically the return of a U.S. Treasury bill with a similar maturity to your investment. 3. Average the Excess Returns: Once you have the excess returns for each time period, calculate the average of these values. 4. **Calculate the Standard Deviation of Excess Returns**: Use the standard deviation function to measure the volatility of the excess returns. This will give you an idea of how much the returns fluctuate. 5. **Divide the Average by the Standard Deviation**: Finally, divide the average excess return by the standard deviation to get the Sharpe ratio. Here's an example in Excel: - Copy this equation into each row for all time periods: `=Return - Risk-Free Rate` - Next, calculate the average of the excess return values in a separate cell: `=AVERAGE(range)` - In another open cell, use the `=STDEV` function to find the standard deviation of excess return: `=STDEV(range)` - Finally, calculate the Sharpe ratio by dividing the average by the standard deviation: `=Average Excess Return / Standard Deviation` Remember, a higher Sharpe ratio indicates better risk-adjusted performance. However, it's important to consider other factors as well when evaluating an investment. Now, let's translate the above explanation into Chinese.

Copy this equation into each row for all time periods. Next, calculate the average of the excess return values in a separate cell. In another open cell, use the =STDEV function to find the standard deviation of excess return. Finally, calculate the Sharpe ratio by dividing the average by the standard deviation.Feb 12, 2018