# Treynor performance measure

(redirected from Treynor Ratios)

## 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.

## 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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Pilotte EA, Sterbenz FP (2006) Sharpe and Treynor Ratios on Treasury Bonds.
Performance is measured by the common performance yardsticks; the Sharpe and Treynor ratios. This study found that conventional funds perform better in terms of average returns to investors than Islamic equity funds.
To see if there are similarities in the mutual funds performance over the sample periods, the Sharpe and Treynor ratios are applied since plots of the market indexes seem to be similar.
Treynor ratios are calculated in a similar way to Sharpe's, except only the systematic risk is used for calculations instead of overall risk.
To gauge the performance of these portfolios, we employ three types of measures: 1) risk-adjusted returns, 2) average six-month buy-and-hold returns, and 3) Sharp and Treynor ratios. To obtain the first group of measures, we adjust portfolio returns for various risk premia.
We synthesise the risk adjusted performance of the different indices in Table 4 as measured by the Sharpe and Treynor ratios with respect to a world market portfolio illustrated by the MSCI World Index.
The performance of portfolios formed from the bottom 10 per cent least attractive DNA, the top 10 and 30 per cent most attractive biotechnology companies and the bottom 10 per cent least attractive bioprocessing companies on a revenue multiple basis, the top 10 per cent most attractive biochemistry companies, the top 10 per cent most attractive bioprocessing companies and the bottom 30 per cent least attractive bioprocessing companies on a price-revenue ratio basis were superior to the benchmark on a risk-adjusted basis using both the Sharpe and Treynor ratios, but not using Jensen's alpha.
Sharpe and Treynor Ratios of Bank and Non-bank Funds
Sharpe (1966) studies the performance of 34 equity style mutual funds, using annual returns for 1954-1963, computing both the Sharpe and Treynor ratios to measure performance.
The Sharpe and Treynor ratios will provide similar rankings for well diversified portfolios.
As scientific literature discloses, the main ratios are standard deviation, alpha, beta, Sharpe and Treynor ratios. Table 4 shows all calculations and now we can to do analysis da all ratios give as the same answer, if not, which of these ratios is the most correct.

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