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Author: humblehenri Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 33349  
Subject: SD and GSD Date: 5/15/2012 9:53 AM
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I've been a member for many years, yet still have Foolish questions! Long story made short: In order to calculate the Sharpe Ratio, we need the arithmetic mean of the (usually, yearly) returns R (call it <R>). Also the risk-free return (either every year, or an average; subtract that from <R>, then divide the whole thing by the SD.

However, the standard calculation for any screen gives the CAGR and the GSD, which is fine. It also gives the SR, BUT it is not at all clear how that is found! (Unless a separate calculation of the ROI and the SD are made, and not shown). Could someone be kind enough to write down the mathematical expression for getting the SR when only the CAGR and GSD are calculated?

It would also be useful to know whether (and how) it is possible to obtain the arithmetic return (ROI) from the CAGR. I could expand the mathematical expressions for the logarithms, and obtain an approximation, but that seems like a lot of work!

Thanks in advance

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