description William Sharpe Overview
William F. Sharpe is an American economist whose research helped establish modern financial economics. He shared the 1990 Nobel Memorial Prize in Economic Sciences with Harry Markowitz and Merton Miller for contributions to the theory of financial economics. Sharpe developed the Capital Asset Pricing Model, which relates an asset's expected return to its exposure to market risk, and the Sharpe ratio, a measure used to compare investment return with volatility.
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William Sharpe ranks #51 of 253 in the Economist ranking, behind James Tobin, ahead of Wassily Leontief.
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What does the Sharpe ratio measure?
The Sharpe ratio measures an investment's excess return relative to the volatility of that return. William Sharpe introduced the underlying reward-to-variability concept, and the measure is now widely used to compare risk-adjusted performance.
What was William Sharpe's contribution to the Capital Asset Pricing Model?
Sharpe independently developed a central version of the Capital Asset Pricing Model in the 1960s. CAPM links an asset's expected return to its systematic risk, represented by beta, rather than to all of its standalone volatility.
Why did William Sharpe share the 1990 Nobel Prize?
Sharpe shared the prize with Harry Markowitz and Merton Miller for pioneering work in financial economics. Markowitz developed portfolio selection, Sharpe advanced asset-pricing theory, and Miller contributed foundational corporate-finance results.
What is the difference between the Sharpe ratio and beta?
The Sharpe ratio relates excess return to total return volatility, including diversifiable and market risk. Beta measures sensitivity to movements in the broader market and is the risk quantity used in the standard CAPM.
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