Sharpe Ratio – Excel Template

Ned Krastev
Ned Krastev

The Sharpe ratio compares performance against a risk-free asset.

Rational investors want to maximize their rate of return and minimize the risk of their investment, so they need a measure of risk-adjusted return, a tool that would allow them to compare different securities. Such a comparison would help them allocate their funds in securities providing the highest return for a given amount of risk.

This is how the Nobel prize-winner William Sharpe came up with the famous Sharpe ratio. It is a great way to make a proper comparison between stocks and portfolios and decide which one is preferable in terms of risk and return.

In the nominator, we have the excess return of a stock, and in the denominator, we have the standard deviation of the stock.

Another related topic you might be interested to explore is Standard Deviation.

This is an open-access Excel template in XLSX format that will be useful for anyone who wants to work as an Asset Manager, or an Investment Professional.

You can now download the Excel template for free.

Sharpe ratio is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.