Sharpe Performance Measure and Treynor Performance Measure Approach to Portfolio Analysis

Cheng Few Lee and Paul W. Chiou

Chapter 91 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 2983-3018 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The main points of this chapter show how Markowitz’s portfolio selection method can be simplified by either the Sharpe performance measure or the Treynor performance measure. These two approaches do not need to use constrained optimization procedures; however, these methods do require the existence of a risk-free rate. Overall, this chapter has mathematically demonstrated how the Sharpe measure and Treynor measure can be used to determine optimal portfolio weights.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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