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The Treynor Ratio should only be used to compare investments within the same sector (i.e. so they have the same benchmark). A higher Treynor Ratio is better.

Check out the related link for an Excel spreadsheet and more information.

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13y ago

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How is the Treynor ratio Annualized?

The Treynor Ratio is (expected return - risk free rate) / beta. Beta is dimensionless and cannot be annualized - the figure is the same whether you use daily, monthly or yearly returns. The expected return and the risk free rate only need to be annualized. If they're based on daily returns, then raise them to the power (1+daily interest rate)^252 (assuming 252 trading days in one year). See the link below for an example of a spreadsheet which calculates the Treynor Ratio


How do you calculate treynor ratio in Excel?

calculate the effective return (mean return minus the risk free rate) divided by the beta. the excel spreadsheet in the related link has an example.


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What is sharp ratio in portfolio management?

sharp ratio: measures the exess return on the portfolio the manager provide for the exposure to risk, the way it calculated. ER_RF/Standrd dev Yasir Alani


Meaning of factor sensitivity in portfolio management?

The ratio of value change of a portfolio to any paricular factor that drives the change


Is there a connection between the Sharpe optimal ratio and the CAPM?

The portfolio with the highest Sharpe ratio is on the efficient frontier, according CAPM. The Excel spreadsheet at the related link allows you to calculate a Sharpe optimal portfolio


What 2 ratio does mortgage lenders use to evaluate your ability to pay a loan?

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When does Sharpe ratio attain its maximum?

The Sharpe Ratio for a portfolio of several investments is maximized when the investment weights are adjusted such that the expected return divided by the combined portfolio variance is maximized. See the related link for an Excel spreadsheet you explore this concept it.


Sharpe Investing?

Have you heard of the Sharpe Ratio? The Sharpe Ratio is a measure of the risk-adjusted return of an asset or a portfolio of assets.The Sharpe Ratio can be used to compare investment strategies or managers, taking into account the amount of risk exposure each has in relation to their returns.William Forsyth Sharpe created the ratio in 1966. He would later develop the Capital Asset Pricing Model (CAPM) for which he would win the Nobel Prize in Economics.The Sharpe Ratio is calculated by dividing the difference between the average return for the portfolio and the risk-free rate of return by the standard deviation of returns for the portfolio.The formula looks like:S(x) = (Rx – Rf) / StdDev(x)Where x = portfolio, Rx = average returns of portfolio, Rf = risk-free rate of return, and StdDev(x) = the standard deviation of returns for x.So how do you go about using this tool? First, it’s important to remember that, just like any other number derived from a formula you use to evaluate investments, The Sharpe Ratio can act as a guide, but should not be used in a vacuum. There are always many things to consider when investing.The Sharpe ratio can give you some idea of the efficiency of a portfolio by showing the amount of return generated per unit of risk assumed.The higher the Sharpe Ratio the better relationship of reward to risk the portfolio is deemed to have.Because the Sharpe Ratio takes volatility of a portfolio into account in its analysis its use is helpful when comparing different investment strategies or managers.All other things being equal (i.e. rate of return, constant risk-free rate) the strategy or manager exhibiting the highest return with the lowest amount of risk (as measured by standard deviation) would be the better choice.


When using mathematics to evaluate alternatives 20 miles per gallon is an example of?

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How calculate expense-to-sales ratio?

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