Open AccessThe Generalized Treynor Ratio
Author(s) -
Georges Hübner
Publication year - 2005
Publication title -
european finance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.933
H-Index - 61
eISSN - 1573-692X
pISSN - 1382-6662
DOI - 10.1007/s10679-005-2265-x
Subject(s) - treynor ratio , mathematics , measure (data warehouse) , information ratio , portfolio , statistics , sharpe ratio , computer science , economics , data mining , financial economics
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 average systematic 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. Copyright Springer 2005
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