Abstract: The generalized Sharpe rule,considering the correlation between the prospective new asset and the existing protfolio held,is a more effective rule for investment decision-making.This paper analyzes the use of the generalized Sharpe rule further,discusses the range within which the prospective asset is worth acquiring,and the determination of optimal investment level,and obtains some important conclusions.This study has practical significance in guiding fund managers’ investment decision making.

Key words: Sharpe ratio, generalized Sharpe rule, investment proportion range, optimal level of investment