Treynor Ratio
The Treynor Ratio (Treynor Measure) is a risk-adjusted performance metric that measures excess return earned per unit of systematic risk, defined as (Rp − Rf) / beta_p, where Rp is the portfolio return, Rf is the risk-free rate, and beta_p is the portfolio beta.
Example: If Rp = 12%, Rf = 2%, and beta_p = 1.2, the Treynor Ratio is (0.12 − 0.02) / 1.2 ≈ 0.083, or about 8.3% per unit of market risk.
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