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.