Ch.11 · Comparing Fund Performance · hard
If a fund's fact sheet shows a 'Treynor Ratio' of 0.8, what does this indicate?
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EXPLANATION
Treynor Ratio = (Fund Return − Risk-Free Rate) ÷ Beta. It measures excess return per unit of systematic (market) risk, unlike Sharpe which uses total risk. Higher Treynor = better reward for market risk taken. Useful for comparing diversified funds.
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