Investor Glossary-risk adjusted returnInvestor Glossary-risk adjusted returnInvestor Glossary-risk adjusted returnInvestor Glossary-risk adjusted returnInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Risk Adjusted Return

The HTML to link to this page
 

The risk-adjusted return of an asset or a portfolio is the return it provides adjusted for how risky it is. An asset with a superior risk-adjusted return is one that has the highest return for a given level of risk. Risk-adjusted return enables investors to compare the performance of low risk, low return investments to high risk, high return investments. Risk-adjusted return is calculated using the Sharpe ratio, a volatility-adjusted measure of return. To calculate risk-adjusted return, subtract the risk-free rate from the investment's return, then divide the resulting number by the standard deviation of the investment's return. The value of a risk-adjusted return lies in its ability to reveal whether an investment's returns are attributable to smart investing or excessive risk-taking. Risk-adjusted return is a useful tool for factoring volatility into investment decisions.



Rate this risk adjusted return definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: dividends payable, limit order, phantom income, deferred tax, wholly-owned subsidiary, cancelled check, LIBOR, 1031 exchange, average price per share, per diem, APR, covered put, irrevocable trust, inflation, labor relations, current ratio, required rate of return, ex-dividend date, stock split, retained earnings, risk management, minority interest, open position, liquidity ratio, command economy, class C shares, ex-dividend, 144a, debt service coverage, diluted share, option premium, balance sheet, margin rate, real GDP, Key Rate Duration, reverse mortgage, FTSE, deferred revenue, FICO score, annual return, stock market close, 401a, EBITDA, implied volatility, 1035 exchange, Zero Cost Collar, quality assurance, VIX, in escrow


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use