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Rob's s1452 Notes

🔎 The reward to volatility ratio

The reward to volatility ratio is just the Sharpe ratio.

From the formula sheet:

Sharpe Ratio (S)(S)E(r)−rFσ\frac{E(r)-r_F}{σ}

In general:

S=E(r)−rfσS = \frac{E(r)-r_f}{σ}

For the risky portfolio:

S=E(rp)−rfσpS = \frac{E(r_p )-r_f}{σ_p}

For the complete portfolio:

S=E(rc)−rfσcS = \frac{E(r_c)-r_f}{σ_c}