Sharpe Ratio

Description

Calculate Sharpe ratio based on a vector of gains (or prices). The formula is: (mean(gains) - rf) / sd(gains). Here rf is some risk-free rate of return, and gains is a vector of gains (usually daily, but could be weekly, monthly, or some other time interval). User can specify prices or gains.

Usage

sharpe(gains = NULL, prices = NULL, rf = 0)

Arguments

Details

NA

Value

Numeric value indicating the Sharpe ratio.

Note

Several definitions of Sharpe ratio are commonly used; this may or may not be the version you prefer.

Author(s)

Dane R. Van Domelen

References

Acknowledgment: This material is based upon work supported by the National Science Foundation Graduate Research Fellowship under Grant No. DGE-0940903.

See Also

sortino, rrr, mdd

Examples

# Randomly generate daily stock gains over a 5-year period
stock.gains <- rnorm(251*5, 0.0005, 0.01)

# Calculate Sharpe ratio using risk-free return of 0
sharpe(stock.gains)

Results