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.