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Sharpe Performance Measure and Treynor Performance Measure Approach to Portfolio Analysis

In: Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes

Author

Listed:
  • Cheng Few Lee
  • Paul W. Chiou

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.

Suggested Citation

  • Cheng Few Lee & Paul W. Chiou, 2024. "Sharpe Performance Measure and Treynor Performance Measure Approach to Portfolio Analysis," World Scientific Book Chapters, in: Cheng Few Lee & Alice C Lee & John C Lee (ed.), Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes, chapter 91, pages 2983-3018, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811269943_0091
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    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;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G3 - Financial Economics - - Corporate Finance and Governance

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