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Sharpe Ratio Calculator

Calculate an ex ante Sharpe ratio and expected excess return from three same-period assumptions.

Published

Sharpe ratio (ex ante scenario)

Scenario risk-adjusted return
0.53
Expected excess return
8%
Expected investment return
12%
Risk-free return
4%
Predicted standard deviation of excess return
15%

Expected excess return per unit of predicted excess-return volatility for the entered period.

Expected return for the investment over one stated future period.
%
Fixed riskless benchmark return for the same future period.
%
Predicted volatility of investment return minus the fixed risk-free return, for the same period.
%

Results update as you type.

An ex ante scenario

This calculator is an ex ante scenario. Its three inputs are user-supplied assumptions for one future period: expected investment return, the same-period fixed risk-free return, and predicted standard deviation of excess return.

Expected excess return is expected investment return minus the same-period risk-free return. The ex ante Sharpe ratio divides that expected excess return by the predicted standard deviation of the differential return.

Expected excess return=E(R)−rf\text{Expected excess return} = E(R) - r_f Ex ante Sharpe ratio=E(R)−rfSD⁡(R−rf)\text{Ex ante Sharpe ratio} = \frac{E(R) - r_f}{\operatorname{SD}(R-r_f)}

Because the benchmark in this scenario is a fixed riskless return for the period, subtracting it does not change the standard deviation. This equivalence does not extend to a variable benchmark.

Example

With a 12% expected investment return, a 4% same-period risk-free return, and 15% predicted excess-return volatility, expected excess return is 8% and the ex ante Sharpe ratio is 8 / 15 = 0.53 after rounding.

The result states expected differential return per unit of predicted differential-return risk for the entered period.

Conventions and limits

Use one horizon and one convention for all three inputs. Do not mix expected inputs with realized historical inputs. This calculator does not derive a mean or standard deviation from a return series and does not annualize the result.

Comparisons require the same period, expected-return construction, benchmark convention, standard-deviation method, and annualization treatment.

The ratio is period-dependent, omits correlation and distribution information beyond mean and standard deviation, and is not a buy, sell, or allocation instruction.

Standard deviation must be at least 0.0001%. This input floor is a calculator validation boundary, not a financial threshold.

Related risk-adjusted measures: the Sortino Ratio Calculator compares reward against downside deviation only, the Treynor Ratio Calculator divides excess return by beta instead of total volatility, and the Information Ratio Calculator measures return relative to a benchmark.

Source

  • William F. Sharpe, The Sharpe Ratio, The Journal of Portfolio Management, Fall 1994, volume 21, issue 1, pages 49–58 — “The Ratio > The Ex Ante Sharpe Ratio,” equations (1)–(2); “Scale Independence,” opening paragraph; “Related Measures,” first paragraph; “Time Dependence,” opening sentence; “Correlations,” first paragraph.

Frequently asked questions

What does the ex ante Sharpe ratio measure?
It divides expected excess return by the predicted standard deviation of the differential return. Expected excess return is the expected investment return minus the same-period risk-free return, so the result states expected differential return per unit of predicted differential-return risk for the entered period.
Can I mix historical returns with expected inputs?
No. Use one horizon and one convention for all three inputs, and do not mix expected inputs with realized historical inputs. This calculator does not derive a mean or standard deviation from a return series and does not annualize the result.
Why does subtracting the risk-free return not change the standard deviation?
Because the benchmark in this scenario is a fixed riskless return for the period, subtracting it does not change the standard deviation. This equivalence does not extend to a variable benchmark, and the ratio itself is period-dependent.

Sources

  • sharpe-stanford

    primary · Aug 10, 2026

    Supports: The Sharpe ratio definition (expected excess return divided by differential-return volatility) from the ratio's author.

  • sharpe-jpm-1994

    secondary · Aug 10, 2026

    Supports: The Sharpe Ratio (Journal of Portfolio Management, 1994) journal exposition of the measure and its period conventions.

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