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Risk Adjusted Return Measures: The Treynor Measure

The Treynor measure relates excess returns to the systematic risks assumed by a manager. In this regard, it provides the same assessment of manager’s skill as does Jensen’s alpha.

The numerator for the Treynor ratio is the difference between the return on the portfolio and the risk free rate. The denominator is the manager’s beta.

The Treynor ratio can be conceived as the slope of a line connecting the risk free rate to the point representing the portfolio’s average return and beta.

For more information, see all articles on: Active Management, Investment Returns, Performance Measurement, Portfolio Management

See also:
  • Risk Adjusted Return Measures: The Sharpe Ratio
  • Choice of Performance Measure for Hedge Funds
  • Risk Adjusted Return Measures
  • Risk Adjusted Return Measures: The Information Ratio
  • Adjusted Earnings Yield
    • Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning Points

    The Intelligent Investor: The Classic Text on Value Investing

    Financial Statement Analysis: A Practitioner's Guide, 3rd Edition

    Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)

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