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Critical Analysis of the Sharpe Ratio: Assessing Performance and Risk in Financial Portfolio Management

Author

Listed:
  • Alexandrina Brinza

    (“Dunarea de Jos” University of Galati, Faculty of Economics and Business Administration, Romania)

  • Viorica Ioan

    (“Dunarea de Jos” University of Galati, Faculty of Economics and Business Administration, Romania)

  • Ioana Lazarescu

    (“Dunarea de Jos” University of Galati, Faculty of Economics and Business Administration, Romania)

Abstract

The Sharpe Ratio, serves as a crucial tool in assessing the relationship between return and risk. This study proposes a critical analysis of the Sharpe Ratio, addressing not only its practical applicability but also its involvement in the decision-making process for investors and portfolio managers. The aim of this research is to uncover the depth of interpretation of the Ratio, surpassing its simple use as an efficiency indicator. A detailed evaluation of the factors influencing the outcome of this ratio is proposed, along with an analysis of its impact on investment decisions. The primary objective of the study is to investigate thoroughly the components of the Sharpe Ratio and how they can provide a more nuanced perspective on performance. This critical analysis makes significant contributions to understanding and applying the Sharpe Ratio in the complex context of financial markets, offering crucial insights for those involved in the investment decision-making process.

Suggested Citation

  • Alexandrina Brinza & Viorica Ioan & Ioana Lazarescu, 2023. "Critical Analysis of the Sharpe Ratio: Assessing Performance and Risk in Financial Portfolio Management," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 633-639, December.
    • Handle: RePEc:ovi:oviste:v:xxiii:y:2023:i:2:p:633-639
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    More about this item

    Keywords

    Risk-return; interest rate; performance; profit distribution; yield;
    All these keywords.

    JEL classification:

    • A00 - General Economics and Teaching - - General - - - General

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