DEFINITION of 'William F. Sharpe'
An American economist who won the 1990 Nobel Prize in Economics, along with Harry Markowitz and Merton Miller, for developing models to assist with investment decision making. Sharpe's capital asset pricing model (CAPM) calculates expected returns based on varied levels of risk and states that taking on more risk is necessary to earn a higher return. Corporations, institutions and pension fund managers have all used CAPM theory to manage risk.
BREAKING DOWN 'William F. Sharpe'
Sharpe was born in Boston in 1934. He earned his PhD from the University of California at Los Angeles and has taught at the University of Washington, the University of California at Irvine and Stanford University. He has been a consultant to numerous major corporations and founded the consulting firm William F. Sharpe Associates. Sharpe also developed the Sharpe ratio, another tool for analyzing investment performance.

Merton Miller
A prominent Chicago school economist. Miller was born in 1923 ... 
International Capital Asset Pricing ...
A financial model that extends the concept of the capital asset ... 
Harry Markowitz
A Nobel Memorial Prize winning economist who devised the modern ... 
Sharpe Ratio
The Sharpe Ratio is a measure for calculating riskadjusted return, ... 
Vernon L. Smith
An American economist who won the Nobel Prize in Economics in ... 
BlackLitterman Model
An asset allocation model that was developed by Fischer Black ...

Fundamental Analysis
Capital Asset Pricing Model  CAPM
CAPM is a model that describes the relationship between risk and expected return. 
Fundamental Analysis
The Capital Asset Pricing Model: An Overview
CAPM helps you determine what return you deserve for putting your money at risk. 
Investing
The Capital Asset Pricing (CAPM) Model: Pros and Cons
CAPM, while criticized for its unrealistic assumptions, provides a more useful outcome than either the DDM or WACC in many situations. 
Bonds & Fixed Income
Find The Highest Returns With The Sharpe Ratio
Learn how to follow the efficient frontier to increase your chances of successful investing. 
Investing Basics
3 Ways To Evaluate the Performance of Alternatives
Learn about three ways to measure the performance of alternative investments. See how the commonly used Sharpe ratio has drawbacks in measuring volatility. 
Bonds & Fixed Income
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth. 
Forex Education
Reduce Your Risk With ICAPM
Avoid unnecesary risks involved in CAPM calculations by also incorporating ICAPM into the mix. 
Active Trading Fundamentals
How The Sharpe Ratio Can Oversimplify Risk
When it comes to hedge funds, this measure is not reliable on its own. 
Fundamental Analysis
Is Apple's Stock Over Valued Or Undervalued?
Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ... 
Investing Basics
Introduction To International CAPM
ICAPM is one of several models used to determine the required return on an asset, discover its limitations and how to use it.

What is a good Sharpe ratio?
Understand how the Sharpe ratio is calculated, and its significance and use for investors in evaluating the performance of ... Read Answer >> 
What is the formula for calculating the capital asset pricing model (CAPM)?
Learn about the capital asset pricing model, or CAPM, and how this formula is used to determine the expected rate of return ... Read Answer >> 
What is the difference between the Sharpe ratio and alpha?
Use alpha and the Sharpe ratio to evaluate mutual funds by comparing their riskadjusted returns. Learn what modern portfolio ... Read Answer >> 
According to the CAPM, the expected return on a stock, that is part of a portfolio, ...
A. the covariance between the stock and the market. B. the variance of the market. C. the market risk premium. D. ... Read Answer >> 
How do I calculate the cost of equity using Excel?
Learn how to calculate the cost of equity in Microsoft Excel using the capital asset pricing model, or CAPM, including brief ... Read Answer >> 
What is the difference between a Sharpe ratio and a Traynor ratio?
Understand the difference between two methods of evaluating portfolio returns on investment, the Sharpe ratio and the Treynor ... Read Answer >>