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Beta, the Treynor ratio, and long-run investment horizons

Author

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  • Charles Hodges
  • Walton Taylor
  • James Yoder

Abstract

Beta and Treynor ratios are computed for portfolios of small stocks, large stocks, and bonds for holding periods of 1 to 30 years. For both the stock and bond portfolios, beta, and the Treynor ratio change substantially with the holding period. Furthermore, the relative Treynor rankings of the portfolios change. Therefore, betas and Treynor ratios cannot be calculated independently of the intended investment horizon. Investors with long-run investment horizons must interpret performance parameters obtained from investment advisory services with due consideration for horizon effects.

Suggested Citation

  • Charles Hodges & Walton Taylor & James Yoder, 2003. "Beta, the Treynor ratio, and long-run investment horizons," Applied Financial Economics, Taylor & Francis Journals, vol. 13(7), pages 503-508.
    • Handle: RePEc:taf:apfiec:v:13:y:2003:i:7:p:503-508
    DOI: 10.1080/0960310022000016622
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    Cited by:

    1. Fernando Gómez-Bezares & Fernando R. Gómez-Bezares & David McMillan, 2015. "Don’t use quotients to calculate performance," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1065584-106, December.
    2. Fernando Gómez-Bezares & Fernando R. Gómez-Bezares, 2012. "Classic performance indexes revisited: axiomatic and applications," Applied Economics Letters, Taylor & Francis Journals, vol. 19(5), pages 467-470, March.
    3. Ziemowit Bednarek & Oleksandr Firsov & Pratish Patel, 2017. "A strong case to calculate the Treynor ratio using log-returns," Journal of Asset Management, Palgrave Macmillan, vol. 18(4), pages 317-325, July.
    4. PANAGIOTIS Anastasiadis & EFTHIMIOS Katsaros & ANASTASIOS-TAXIARCHIS KOUTSIOUKIS, 2020. "Performance-Risk Nexus Of Global Low-Rated Etfs During The Qe-Tapering Period," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 15(1), pages 194-211, April.

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