What is Treynor Ratio

What is Treynor Ratio?

E

Expert

Verified

Treynor ratio: The Treynor or Reward-to-variability ratio is the other Sharpe-like measure, but here the denominator is the systematic risk, measured with the portfolio’s beta, (as in Capital Asset Pricing Model), in place of the total risk:

Treynor ratio = (µ − r)/β

In a well-diversified portfolio Sharpe and Treynor are similar, but Treynor is more applicable for less diversified portfolios or single stocks.

   Related Questions in Financial Management

©TutorsGlobe All rights reserved 2022-2023.