How do I calculate the bear market?
When considering investing in a bear market, it is important to understand how to calculate the risk associated with this type of market. One of the most popular methods for assessing risk is the Sharpe Ratio. The Sharpe Ratio is a calculation that takes into account the risk-free rate of return, the expected return on the market portfolio, and the standard deviation of the market portfolio. This calculation helps investors determine the risk associated with a bear market.
For those who are more comfortable using spreadsheet programs such as Sourcetable, you can calculate the Sharpe Ratio using the following formula:
Sharpe Ratio = (Expected Return on Market Portfolio - Risk Free Rate of Return) / Standard Deviation of Market Portfolio.
By understanding how to calculate the Sharpe Ratio, investors can make more informed decisions about investing in a bear market.