Sharpe Ratio - Hedge Funds.

[BaseballRedhawks]

The annual sharpe ratio is typically estimated using shorter time period. To estimate the annual sharpe ratio for a hedge fund using quarterly returns, the analyst multiples the quarterly return by 4 and multiples the quarterly standard deviation by the square root of 4. Thus the annualized sharpe ratio is biased upward by the square root of 4.
Can someone please explain the last sentence?
Thanks!

 

[S2000magician]

All it’s saying is that the annual Sharpe ratio will be twice the quarterly Sharpe ratio: numerator multiplied by 4, denominator multiplied by √4 = 2.