Treynor Index

Treynor Index

A measure of the excess return per unit of risk, where excess return is defined as the difference between the portfolio's return and the risk-free rate of return over the same evaluation period and where the unit of risk is the portfolio's beta. Named after Jack Treynor.

Treynor Performance Measure

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.
Mentioned in ?
References in periodicals archive ?
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.
In what returns adjusted to risk is concerned, they used the Sharpe Index (IS), the Treynor Index (T), the M2 Index, Jensen's Alpha (a) and the Sortino Index (S).
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
Two performance measures are often used to determine the risk-adjusted performance of a portfolio: the Sharpe Ratio and the Treynor Index.
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.
Rank the following funds based on the Treynor Index (highest to lowest):