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A Refinement to the Treynor Ratio

Author

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  • Janusz Brzeszczyński

    (Edinburgh Napier University (ENU), Department of Accounting and Finance, Business School
    University of Łódź, Department of Capital Market and Investments, Faculty of Economics and Sociology
    International University of Monaco (IUM), Department of Economics and Finance)

  • Jerzy Gajdka

    (University of Łódź, Department of Capital Market and Investments, Faculty of Economics and Sociology)

  • Piotr Pietraszewski

    (University of Łódź, Department of Capital Market and Investments, Faculty of Economics and Sociology)

  • Tomasz Schabek

    (University of Łódź, Department of Capital Market and Investments, Faculty of Economics and Sociology)

Abstract

We propose a refinement to the Treynor Ratio, as a key risk-adjusted measure of investment performance, and we further demonstrate its usefulness based on calculations relying on a sample of different funds. The original Treynor Ratio has shortcomings that affect the correctness of rankings of funds (or other investment results), which are formed based on it. The Modified Treynor Ratio proposed in this paper produces rankings that avoid two major anomalies, which occur in case of the application of the original Treynor Ratio.

Suggested Citation

  • Janusz Brzeszczyński & Jerzy Gajdka & Piotr Pietraszewski & Tomasz Schabek, 2025. "A Refinement to the Treynor Ratio," Journal of Asset Management, Palgrave Macmillan, vol. 26(7), pages 711-724, December.
    • Handle: RePEc:pal:assmgt:v:26:y:2025:i:7:d:10.1057_s41260-025-00417-z
    DOI: 10.1057/s41260-025-00417-z
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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