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In finance, Jensen's alpha [1] (or Jensen's Performance Index, ex-post alpha) is used to determine the abnormal return of a security or portfolio of securities over the theoretical expected return. It is a version of the standard alpha based on a theoretical performance instead of a market index .
In finance, the Treynor reward-to-volatility model (sometimes called the reward-to-volatility ratio or Treynor measure [1]), named after American economist Jack L. Treynor, [2] is a measurement of the returns earned in excess of that which could have been earned on an investment that has no risk that can be diversified (e.g., Treasury bills or a completely diversified portfolio), per unit of ...
A stock picking rule of thumb for assets with positive beta is to buy if the Treynor ratio will be above the SML and sell if it will be below (see figure above). Indeed, from the efficient market hypothesis, it follows that we cannot beat the market. Therefore, all assets should have a Treynor ratio less than or equal to that of the market.
Treynor ratio measures how successful an investment is in terms of returns after considering the inherent level of risk involved. 3 Funds With High Treynor Ratio for Risk-Taking Investors Skip to ...
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where α i is called the asset's alpha, β i is the asset's beta coefficient and SCL is the security characteristic line. Once an asset's expected return, (), is calculated using CAPM, the future cash flows of the asset can be discounted to their present value using this rate to establish the correct price for the asset. A riskier stock will ...
Sharpe ratios, along with Treynor ratios and Jensen's alphas, are often used to rank the performance of portfolio or mutual fund managers. Berkshire Hathaway had a Sharpe ratio of 0.79 for the period 1976 to 2017, higher than any other stock or mutual fund with a history of more than 30 years.
Calmar ratio; Coefficient of variation; Information ratio; Jaws ratio; Jensen's alpha; Modigliani risk-adjusted performance; Roy's safety-first criterion; Sharpe ratio; Sortino ratio; Sterling ratio; Treynor ratio; Upside potential ratio; V2 ratio