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There are sufficiently different ways to calculate the Sharpe ratio that the best advice I can give is to do whatever your boss wants. Also, if it is for a paper or research document, just make clear you document your method. My approach is usually to calculate the highest frequency Sharpe ratio I can based on the data. The higher frequency choice is to get ...


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Here is an example calculation according to the formula by William F. Sharpe, 1994. The OP's method of annualising the variance (as used below), is also specified by the Committee of European Securities Regulators in this document, page 5, box 1. For this example, taking 24 months of returns of risk-free proxy (US 4-week T-bills) and an example stock, (and ...


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I'm currently also using daily returns which I want to annualize. This is my approach: For every month, I calculate the simple return using the formula: (end-of-month closing price / beginning-of-month closing price) - 1. I use the Excel formula somproduct(geomean(A1:A12+1)-1) to find the monthly compounded return. Finally, I annualize the result of step 2 ...



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