Inputs
Methodology
Excess = return − risk-free per period. Sharpe = mean(Excess) ÷ stdev(Excess).
Annualization uses periods per year: daily 252 weekly 52 monthly 12 quarterly 4 annual 1.
Confidence interval uses normal approximation: SE ≈ sqrt((1 + 0.5 S²)/(n − 1)).
Results
FAQs
1) What is the Sharpe Ratio?
The Sharpe Ratio measures risk-adjusted performance by dividing the average excess return by its standard deviation over the same period.
2) Should I use sample or population volatility?
For finite samples the sample definition with n−1 in the denominator is conventional because it reduces bias in the variance estimate.
3) How are annualized values computed?
Mean is multiplied by periods per year and volatility is multiplied by the square root of periods per year. The annual Sharpe equals the period Sharpe times the square root of periods per year.
4) How do I enter the risk-free rate?
Enter a percent or decimal. If it is an annual rate the calculator converts it to a per-period rate using geometric compounding before subtracting from raw returns.
5) Can I paste excess returns directly?
Yes. Select the option indicating returns are already net of the risk-free rate and the calculator will skip the subtraction step.
6) Why is my Sharpe undefined or infinite?
This happens when volatility is zero or cannot be computed due to insufficient data. Provide at least two distinct values to compute a valid standard deviation.
7) Do non-normal returns affect confidence intervals?
Yes. The normal approximation can be unreliable with skewness autocorrelation or fat tails. Consider block bootstrap or heteroskedasticity and autocorrelation consistent adjustments.