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The Generalized Treynor Ratio

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  • Georges Hübner

Abstract

This paper extends the Treynor performance ratio for a single index to the case of multiple indexes. The new measure, called the Generalized Treynor Ratio, preserves the same key geometric and analytical properties of the original Treynor Ratio. The Generalized Treynor Ratio is defined as the abnormal return of a portfolio per unit of premium-weighted average systematic risk, normalized by the premium-weighted averagesystematic risk of the benchmark. Numerical simulations reveal that the portfolio rankings produced with this measure are more precise and more stable than the ones provided by Jensen's alpha and the Information Ratio.

Suggested Citation

  • Georges Hübner, 2005. "The Generalized Treynor Ratio," Review of Finance, European Finance Association, vol. 9(3), pages 415-435.
    • Handle: RePEc:oup:revfin:v:9:y:2005:i:3:p:415-435.
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    File URL: http://hdl.handle.net/10.1007/s10679-005-2265-x
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    2. Carmichael, Benoît & Coën, Alain, 2008. "Asset pricing models with errors-in-variables," Journal of Empirical Finance, Elsevier, vol. 15(4), pages 778-788, September.
    3. Cogneau, Philippe & Hübner, Georges, 2015. "The prediction of fund failure through performance diagnostics," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 224-241.
    4. Leif Holger Dietze & Oliver Entrop & Marco Wilkens, 2009. "The performance of investment grade corporate bond funds: evidence from the European market," The European Journal of Finance, Taylor & Francis Journals, vol. 15(2), pages 191-209.
    5. Galatis Nikolaos & Nitsi Ekaterini & Theloura Chrysoula, 2020. "Investigating Financial Performance of Low-and High-Rated ETFs During the QE-Tapering," HOLISTICA – Journal of Business and Public Administration, Sciendo, vol. 11(1), pages 107-123, April.
    6. Laurent Bodson & Laurent Cavenaile & Danielle Sougné, 2011. "Does size affect mutual fund performance? A general approach," Journal of Asset Management, Palgrave Macmillan, vol. 12(3), pages 163-171, August.

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