Sharpe Ratio Trend 2026

Developed by Nobel laureate William Sharpe, this financial metric measures risk-adjusted investment returns. It calculates excess return per unit of volatility, revealing whether higher profits stem from smart decisions or excessive risk. Portfolio managers and individual investors use it to compare fund performance and optimize asset allocation. A higher Sharpe ratio indicates more efficient returns relative to risk, making it essential for evaluating mutual funds, hedge funds, and personal portfolios.