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8a. Calculate the Sharpe ratio for small-cap stocks. (Page 282) U.S. Treasury bills average returns, 1926-2016 (risk-free rate) 3.4% Small-cap stocks average return, 1926-2016 16.6%
8a. Calculate the Sharpe ratio for small-cap stocks. (Page 282) | |||||||
U.S. Treasury bills average returns, 1926-2016 (risk-free rate) | 3.4% | ||||||
Small-cap stocks average return, 1926-2016 | 16.6% | ||||||
Small-cap stocks standard deviation, 1926-2016 | 31.9% | ||||||
Small-cap stock Sharpe ratio | (Solution: 0.41) | ||||||
8b. Calculate the Sharpe ratio for large-cap stocks. (page 282) | |||||||
Large-cap stocks average return, 1926-2016 | 12.0% | ||||||
Large-cap stocks standard deviation, 1926-2016 | 19.9% | ||||||
Large-cap stock Sharpe ratio | (Solution: 0.43) | ||||||
8c. Compare the Sharpe ratios in 8a and 8b to suggest which class of stock was more rewarding to investors. Explain. (critical thinking) | |||||||
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