Financial modelling terms explained

Treynor Ratio

The Treynor ratio was developed by Jack Treynor, a well-known financial expert. It is used to determine the performance of a hedge fund and compare it to the market. This ratio is calculated as the excess return of a portfolio divided by the beta of the portfolio.

What Is the Treynor Ratio?

The Treynor Ratio is a measure of the risk-adjusted performance of a given investment or portfolio. It is calculated as the excess return of the investment or portfolio over the risk-free rate, divided by the beta of the investment or portfolio. The higher the Treynor Ratio, the better the risk-adjusted performance of the investment or portfolio.

What Is the Formula for the Treynor Ratio?

The Treynor ratio is a measure of risk-adjusted performance. It is calculated by dividing the return on a security or portfolio by the beta of that security or portfolio.

How Do You Calculate the Treynor Ratio?

The Treynor ratio measures the excess return per unit of risk. It is calculated as the ratio of the portfolio's return over the risk-free rate, minus the market's expected return, to the portfolio's beta.

The Treynor ratio is named after Jack Treynor, who first proposed the measure in 1962.

What's the Difference Between the Treynor Ratio and the Sharpe Ratio?

The Treynor Ratio is a measure of risk-adjusted performance. It is calculated by dividing the Treynor Index by the volatility of the investment. The Treynor Index is calculated by subtracting the risk-free rate from the rate of return for the investment. The Sharpe Ratio is also a measure of risk-adjusted performance. It is calculated by dividing the excess return of the investment by the standard deviation of the investment.

What's an Example of the Treynor Ratio?

The Treynor Ratio is a measure of the excess return of a portfolio over the risk-free rate divided by the portfolio's beta. It is used to evaluate the performance of a portfolio manager or investment fund.

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