Comprehensive and Detailed Explanation From Exact Extract:
A negative Sharpe ratio indicates that the fund’s return is less than the risk-free rate, as the numerator (Fund Return - T-bill Rate) is negative. The feedback from the document states:
"The Sharpe ratio is calculated as (Fund Return - T-bill Rate) ÷ Fund Standard Deviation. A negative Sharpe ratio means the mutual fund has a return less than the risk-free rate, as the numerator of the ratio would be negative."
[Reference:Chapter 15 – Selecting a Mutual FundLearning Domain:Evaluating and Selecting Mutual Funds, , ]
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