{"id":66187,"date":"2012-02-21T17:51:27","date_gmt":"2012-02-21T12:21:27","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=66187"},"modified":"2012-02-21T17:51:28","modified_gmt":"2012-02-21T12:21:28","slug":"alpha-beta-sharpe-and-information-ratio","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2012\/02\/21\/alpha-beta-sharpe-and-information-ratio\/","title":{"rendered":"Alpha, Beta, Sharpe and Information Ratio"},"content":{"rendered":"<div style=\"margin: 1em;width: 310px;float: left\" class=\"zemanta-img\"><a href=\"http:\/\/commons.wikipedia.org\/wiki\/File:Price-Earnings_Ratios_as_a_Predictor_of_Ten-Year_Returns_%28Shiller_Data%29.png\"><img loading=\"lazy\" decoding=\"async\" style=\"border-bottom: medium none;border-left: medium none;border-top: medium none;border-right: medium none\" alt=\"ten-year returns\" src=\"http:\/\/upload.wikimedia.org\/wikipedia\/commons\/thumb\/7\/7b\/Price-Earnings_Ratios_as_a_Predictor_of_Ten-Year_Returns_%28Shiller_Data%29.png\/300px-Price-Earnings_Ratios_as_a_Predictor_of_Ten-Year_Returns_%28Shiller_Data%29.png\" width=\"300\" height=\"240\"><\/a> <\/p>\n<p style=\"font-size: 0.8em\" class=\"zemanta-img-attribution\">Image via <a href=\"http:\/\/commons.wikipedia.org\/wiki\/File:Price-Earnings_Ratios_as_a_Predictor_of_Ten-Year_Returns_%28Shiller_Data%29.png\">Wikipedia<\/a><\/p>\n<\/div>\n<p>StockViz now had alpha, beta, Sharpe and information ratio values available for individual stocks. The calculations are done daily using 1 year\u2019s worth of historical data.<\/p>\n<p>&#8220;Alpha&#8221; is a measure of a manager\u2019s skill by measuring the portion of the managers returns that are not attributable to &#8220;Beta&#8221;, or the portion of performance attributable to a benchmark. This is how \u201cbetter\u201d a stock is relative to owning the index (Nifty 50) outright.<\/p>\n<p>\u201cBeta\u201d is similar to correlation. By definition, the market itself has a beta of 1.0. A stock whose returns vary more than the market\u2019s returns has a beta whose absolute value is greater than 1. A stock whose returns vary less than the market\u2019s returns has a beta with an absolute value less than 1.<\/p>\n<p>The \u201cSharpe\u201d ratio tells us whether a portfolio\u2019s returns are due to smart investment decisions or a result of excess risk. The greater a portfolio\u2019s Sharpe ratio, the better its risk-adjusted performance has been. A negative Sharpe ratio indicates that a risk-less asset would perform better than the security being analyzed.<\/p>\n<p>\u201cInformation Ratio\u201d relates the degree to which an investment has beaten the benchmark to the consistency with which the investment has beaten the benchmark.<\/p>\n<p>Read the <em><a title=\"Calculating Returns\" href=\"http:\/\/stockviz.biz\/index.php\/tag\/returns\/\">returns<\/a><\/em> series here.<\/p>\n<div style=\"margin-top: 10px;height: 15px\" class=\"zemanta-pixie\"><img decoding=\"async\" style=\"border-bottom-style: none;border-left-style: none;border-top-style: none;float: right;border-right-style: none\" class=\"zemanta-pixie-img\" alt=\"\" src=\"http:\/\/img.zemanta.com\/pixy.gif?x-id=527cc971-0b58-4658-b3fd-ea5736c415cd\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Image via Wikipedia StockViz now had alpha, beta, Sharpe and information ratio values available for individual stocks. The calculations are done daily using 1 year\u2019s worth of historical data. &#8220;Alpha&#8221; is a measure of a manager\u2019s skill by measuring the portion of the managers returns that are not attributable to &#8220;Beta&#8221;, or the portion of &hellip; <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[960],"class_list":["post-66187","post","type-post","status-publish","format-standard","hentry","category-news","tag-returns","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/66187","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=66187"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/66187\/revisions"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=66187"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=66187"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=66187"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}