Treynor Performance Measure

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A measurement of return on a portfolio in excess of what a riskless investment would have earned per unit of risk. It is calculated by taking the portfolio's rate of return, subtracting the return on the riskless investment (usually a Treasury bond), and dividing by the portfolio's beta. It is important to note that the Treynor performance measure does not account for the effect, if any, of active portfolio management. It is simply a measurement of actual returns. It is also called the return to volatility ratio.

Treynor performance measure

A gauge of risk-adjusted portfolio performance. The measure is calculated by dividing the portfolio beta (a measure of market, or systematic risk) into the average difference between the portfolio's returns and returns on a risk-free asset. A higher number represents better performance by the portfolio manager. Compare Sharpe performance measure.

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