Portfolio Performance

Here are measures of portfolio performance.


  • measures systematic risk (historical volatility of a security versus an index)
    • e.g., β=1.1 means 10% more volatile than the stock market average
    • e.g., β=0.9 means 10% less volatile than the stock market average

Standard Deviation

  • variability of returns (usually annually)

Sharpe Ratio

  • (real rate of return) / (standard deviation)
  • real rate of return = annualized rate of return – risk-free rate of return

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