Sharpe portfolio measure - Study guides, Class notes & Summaries

Nominal vs Real Interest Rate (+ Equations)Nominal interest rate: the growth rate of your $ as quoted on the investment Real interest rate: the growth rate of your purchasing power Approximation: r(r) = r(n) - i Exact: r(r) = (1+r)/(1+i) - 1 Fisher equation: r(n) = r(r) - E(i) What does the Sharpe Ratio measure?It is equal to the risk premium of portfolio divided by standard deviation. It measures tradeoff between return and risk. Three properties of a normal distribution1) Symmetric ...

the average squared difference between the mean and each item in the population or sample - variance measure of dispersion expressed as the square root of the variance; measure of volatility and the dispersion from an average; used in CAL, Sharpe, M2 and IR - standard deviation describes asymmetry of data points from a normal distribution - skewness measures the peakedness of probability distribution or normal distribution curve -positive - more slender, high peak/fat tails -negative - th...

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