The Sharpe Ratio

. Over 25 years ago, in Sharpe 1966, I introduced a measure for the performance of mutual funds and proposed the term reward-to-variability ratio to describe it (the measure is also described in Sharpe 1975 ). While the measure has gained considerable popularity, the name has not. Other authors have termed the original version the Sharpe Index (Radcliff 1990, p. 286 and Haugen 1993, p. 315), the Sharpe Measure (Bodie, Kane and Marcus 1993, p. 804, Elton and Gruber 1991, p. 652, and Reilly 1989, p.803), or the Sharpe Ratio (Morningstar 1993, p. 24). Generalized versions have also appeared under various names (see. for example, BARRA 1992, p. 21 and Capaul, Rowley and Sharpe 1993, p. 33).