Measures the risk-reward ratio of an investment. It compares the return of a given investment, given its riskiness (as measured by its standard deviation), to the return of a virtually risk-free investment, such as the three-month Treasury bill. The difference between the return of a fund and that of a risk-free investment is called the fund's "excess return". The higher the Sharpe Ratio, the better the fund's historical risk-adjusted performance.