- Tax Planning
- Investments 1: Before you Invest
- Investments 2: Your Investment Plan
- Investments 3: Securities Market Basics
- Investments 4: Bond Basics
- Investments 5: Stock Basics
- Investments 6: Mutual Fund Basics
- Investments 7: Building Your Portfolio
- Investments 8: Picking Financial Assets
- Investments 9: Portfolio Rebalancing and Reporting
- Retirement 1: Basics
- Retirement 2: Social Security
- Retirement 3: Employer Qualified Plans
- Retirement 4: Individual and Small Business Plans
- Estate Planning Basics
Treynor Measure
Treynor Measure
The Treynor measure is similar to the Sharpe measure, but the Treynor measure uses the portfolio’s beta instead of the portfolio’s standard deviation. The Treynor measure is calculated as follows:
(rp – rf) / ßp
In this equation, rp = the average return on the portfolio, rf = the average risk-free rate, and ßp = the weighted average beta of the portfolio. The Treynor measure is found by dividing the portfolio risk premium by the portfolio risk as measured by the beta.
An asset’s Treynor measure in isolation also means little. It also must be measured against the market’s Treynor measure, which is calculated by dividing the market risk premium, or the return on the market minus the risk-free rate by the beta of the market, which is 1.0. If the asset’s Treynor measure is greater than the market’s Treynor measure, the asset has outperformed on a risk-adjusted basis.
