Description Usage Arguments Details Author(s) References See Also Examples
The Sharpe ratio is simply the return per unit of risk (represented by variability). In the classic case, the unit of risk is the standard deviation of the returns.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 
R 
an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns 
Rf 
risk free rate, in same period as your returns 
p 
confidence level for calculation, default p=.95 
FUN 
one of "StdDev" or "VaR" or "ES" to use as the denominator 
weights 
portfolio weighting vector, default NULL, see Details in

annualize 
if TRUE, annualize the measure, default FALSE 
SE 
TRUE/FALSE whether to ouput the standard errors of the estimates of the risk measures, default FALSE. 
SE.control 
Control parameters for the computation of standard errors. Should be done using the 
... 
any other passthru parameters to the VaR or ES functions 
\frac{\overline{(R_{a}R_{f})}}{√{σ_{(R_{a}R_{f})}}}
William Sharpe now recommends InformationRatio
preferentially
to the original Sharpe Ratio.
The higher the Sharpe ratio, the better the combined performance of "risk" and return.
As noted, the traditional Sharpe Ratio is a riskadjusted measure of return that uses standard deviation to represent risk.
A number of papers now recommend using a "modified Sharpe" ratio using a Modified CornishFisher VaR or CVaR/Expected Shortfall as the measure of Risk.
We have recently extended this concept to create multivariate modified
Sharpelike Ratios for standard deviation, Gaussian VaR, modified VaR,
Gaussian Expected Shortfall, and modified Expected Shortfall. See
VaR
and ES
. You can pass additional arguments
to VaR
and ES
via ... The most important is
probably the 'method' argument/
This function returns a traditional or modified Sharpe ratio for the same periodicity of the data being input (e.g., monthly data > monthly SR)
Brian G. Peterson
Sharpe, W.F. The Sharpe Ratio,Journal of Portfolio Management,Fall 1994, 4958.
Laurent Favre and JoseAntonio Galeano. MeanModified ValueatRisk Optimization with Hedge Funds. Journal of Alternative Investment, Fall 2002, v 5.
SharpeRatio.annualized
InformationRatio
TrackingError
ActivePremium
SortinoRatio
VaR
ES
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17  data(managers)
SharpeRatio(managers[,1,drop=FALSE], Rf=.035/12, FUN="StdDev")
SharpeRatio(managers[,1,drop=FALSE], Rf = managers[,10,drop=FALSE], FUN="StdDev")
SharpeRatio(managers[,1:6], Rf=.035/12, FUN="StdDev")
SharpeRatio(managers[,1:6], Rf = managers[,10,drop=FALSE], FUN="StdDev")
data(edhec)
SharpeRatio(edhec[, 6, drop = FALSE], FUN="VaR")
SharpeRatio(edhec[, 6, drop = FALSE], Rf = .04/12, FUN="VaR")
SharpeRatio(edhec[, 6, drop = FALSE], Rf = .04/12, FUN="VaR" , method="gaussian")
SharpeRatio(edhec[, 6, drop = FALSE], FUN="ES")
# and all the methods
SharpeRatio(managers[,1:9], Rf = managers[,10,drop=FALSE])
SharpeRatio(edhec,Rf = .04/12)

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