On the other hand, when relatively poorly diversified portfolios are considered, the
Treynor Index, due to its diversification weakness and failure to address some of the variables, may lead the results to vary considerably.
Treynor index: The
Treynor index measures portfolio risk with beta and calculates portfolio's market risk premium relative to its beta:
In fact, while outperforming companies do not record significant abnormal returns, the targets which have a lower possibility of increasing shareholder wealth in the future (companies with a negative
Treynor Index) have an ACAR that is extremely negative and significant at 1% over the twenty and thirty days which follow the alert.
* All the seven schemes covered under the study showed negative risk premium, Sharpe index and
Treynor index in all the years covered under
Similar conclusions are revealed by the analysis of the
Treynor index values in Table 4.
The paper applies three popular measures of performance such as Jensen index,
Treynor index and Sharpe index.
The
Treynor Index uses systematic risk, measured by beta, instead of total risk in calculating risk-adjusted measures.
The
Treynor index is the spread between the fund's unadjusted total return and the risk-free rate, divided by the beta of the fund.
The strongest association is observed with the
Treynor index. However, in the case of developed markets there is weak evidence to suggest that DEA models specified under the conventional framework may have a decisive effect on the ranking compared to the rankings obtained under the standard measures.