Named after William F. Sharpe, the Sharpe Ratio measures how much excess return is received for the extra volatility endured by holding a riskier asset compared to a risk-free asset, typically represented by government securities. It is calculated by taking the difference between the expected return of the investment and the risk-free rate, then dividing this result by the standard deviation of the investment's excess return. A higher Sharpe Ratio indicates a better risk-adjusted performance.