William F. Sharpe


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.

  1. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, ...
  2. Risk-Adjusted Return

    A concept that refines an investment's return by measuring how ...
  3. Risk-Free Rate Of Return

    The theoretical rate of return of an investment with zero risk. ...
  4. Capital Asset Pricing Model - CAPM

    A model that describes the relationship between risk and expected ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Put-Call Parity

    A principle that defines the relationship between the price of ...
Related Articles
  1. Bonds & Fixed Income

    Understanding The Sharpe Ratio

    This simple ratio will tell you how much that extra return is really worth.
  2. Personal Finance

    Does Your Investment Manager Measure Up?

    These key stats will reveal whether your advisor is a league leader or a benchwarmer.
  3. Investing

    Measure Your Portfolio's Performance

    Learn three ratios that will help you evaluate your investment returns.
  4. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  5. Fundamental Analysis

    The Capital Asset Pricing Model: An Overview

    CAPM helps you determine what return you deserve for putting your money at risk.
  6. Active Trading Fundamentals

    How The Sharpe Ratio Can Oversimplify Risk

    When it comes to hedge funds, this measure is not reliable on its own.
  7. Fundamental Analysis

    A Deeper Look At Alpha

    The Jensen index helps investors compare realized returns to what should've been achieved.
  8. Investing

    Is it Time to “Buy” Inflation?

    Based on recent data from the Treasury-Inflation Protected Securities (TIPS) market, it would seem that most investors aren’t worried about inflation.
  9. Mutual Funds & ETFs

    Top 3 Equity Energy Mutual Funds

    Explore detailed analysis of the top three equity energy mutual funds, and learn about the characteristics and suitability of these funds.
  10. Mutual Funds & ETFs

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
  1. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  2. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  3. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  4. What fees do financial advisors charge?

    Financial advisors who operate as fee-only planners charge a percentage, usually 1 to 2%, of a client's net assets. For a ... Read Full Answer >>
  5. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  6. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!