A 15% return sounds appealing compared to a 10% return. But what if that 15% came from an investment that sometimes dropped 40% in a bad month? Meanwhile, the 10% came from something that moved steadily and predictably. The Sharpe ratio, created by economist William F. Sharpe, makes this comparison meaningful. It takes an investment's excess return, its return above the risk-free rate, like a Treasury bill yield.…
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