[Under Construction]

Home
Open An Account
Our Service Agent
About Us
Account Insurance
Advertising
Contact Us
Search

 

 

The Sharpe Ratio

 Named for William Sharpe, who is one of the leading researchers of modern portfolio theory and asset allocation theory.  His research showed that the portfolio with the highest Sharpe Ratio is the one portfolio, among all possible portfolios that can be constructed, that gives investors the most "bang for their buck".  In other words, it gives the most risk-adjusted return.  Figure 1 shows the asset weights and the expected annual returns of the Sharpe-Ratio portfolios for investment horizons ranging from 1 to 40 years. 

 Sharpe-Ratio Portfolios

 

1-Yr

(%)

5-Yr

(%)

10-Yr

(%)

15-Yr

(%)

20-Yr

(%)

25-Yr

(%)

30-Yr

(%)

40-Yr

(%)

Expected Annual Return

8.36

8.12

9.53

9.49

11.24

9.72

7.71

10.85

   Std Dev

+8.73

+4.16

+2.96

+2.34

+1.90

+1.39

+0.61

+0.76

Asset Weights

 

 

 

 

 

 

 

 

   Equities

30.63

41.17

55.12

54.04

66.66

69.60

61.71

86.90

   Bonds

69.37

58.83

44.88

45.96

33.24

30.40

-

13.10

   Cash

-

-

-

-

-

-

38.30

-

Figure 1

 

 

Last modified: 03/06/08