The Sharpe ratio was invented in 1966 by William F. Sharpe. Investors and economists use this ratio to determine the prospective return on investment (ROI). The Sharpe ratio assesses the likelihood of returns relative to the uncertainty. The ratio is sometimes referred to as the Sharpe index, reward-to-variability ratio, or Sharpe measure. The Sharpe ratio can, in essence, be used to determine if an investment is risk-worthy. The average return of an investment that exceeds the risk-free rate per unit of deviation of a certain asset is measured technically. The asset with a greater Sharpe ratio would be deemed better, meaning it has a bigger potential for returns in comparison to the risks, if two distinct financial instruments were evaluated based on their Sharpe ratio. Therefore, the investing or trading technique is more appealing the higher the Sharpe ratio is. Even Ponzi schemes, meanwhile, can have a high Sharpe ratio. However, Ponzi scheme data input is fraudulent and does not represent actual returns. Therefore, it's crucial to apply the Sharpe ratio correctly (and with reliable data). The Sharpe ratio is a popular statistic used by large fund managers and banks to assess the performance of their portfolios. Financial markets, including the stock market, may also use it. The computation can approach 0 when the volatility is extremely great or when the returns are consistently rising, so negative Sharpe ratio figures are not particularly useful in practice.