Hello,
Im wondering “what” risk free rate you should use in performance ratios, for example sharpe or traynor.
Lets say using excel and simple equations I calculate the expected return of Markte (Mean SP500) expected return of a porfolio of mine (mean of historical returns) and I calculate the sample standard deviation.
If I want to know the Sharpe ratio and having a excel sheet with monthly data, which risk free rate should I use and should a use a Mean of the series of risk free?
For example: tnx (10 year us) is at 2.16%. should i use this last rate and convert it to months 2.16^(1/12)? Should a use a mean/median of the TNX rates and then convert it to months? Or should I use a 1 month treasury and also convert the rate to months?
I have this question so I can apply it to my own studies.
Thanks!