Treynor Ratio
The Treynor Ratio is a measure of a portfolio’s risk-adjusted performance. It is calculated by dividing the portfolio’s excess return over the risk-free rate by its beta. The Treynor Ratio is a measure of the portfolio’s return per unit of systematic risk, or market risk. It is a measure of the portfolio’s ability to generate returns in excess of the risk-free rate, given the amount of systematic risk taken.
History of the Treynor Ratio
The Treynor Ratio was developed by Jack Treynor in 1965. Treynor was a professor at the University of California, Los Angeles, and a pioneer in the field of portfolio theory. He developed the Treynor Ratio as a way to measure the performance of a portfolio relative to its risk. The Treynor Ratio is a measure of the portfolio’s return per unit of systematic risk, or market risk. It is a measure of the portfolio’s ability to generate returns in excess of the risk-free rate, given the amount of systematic risk taken.
Table of Comparisons
| Portfolio | Excess Return | Risk-Free Rate | Beta | Treynor Ratio |
|---|---|---|---|---|
| Portfolio A | 10% | 2% | 1.2 | 7.5% |
| Portfolio B | 12% | 2% | 1.5 | 8% |
Summary
The Treynor Ratio is a measure of a portfolio’s risk-adjusted performance. It is calculated by dividing the portfolio’s excess return over the risk-free rate by its beta. The Treynor Ratio is a measure of the portfolio’s return per unit of systematic risk, or market risk. It is a measure of the portfolio’s ability to generate returns in excess of the risk-free rate, given the amount of systematic risk taken. For more information about the Treynor Ratio, you can visit Investopedia, The Balance, and Morningstar.
See Also
- Sharpe Ratio
- Jensen’s Alpha
- Information Ratio
- Sortino Ratio
- Calmar Ratio
- Upside Potential Ratio
- Omega Ratio
- Gain to Pain Ratio
- Alpha
- Beta
