William Sharpe on Pricing and Risk
This week on our Masters in Business radio podcast, we sit down with William Sharpe, winner of the 1990 Sveriges Riksbank Prize in Economic Sciences (aka Nobel Prize for economics) and creator of the capital-asset pricing model.
Among other things, Sharpe helped Wells Fargo & Co. develop the first index fund. Then, he came up with a way to calculate returns based on investment risk -- he called it the reward-to-variability-ratio portfolio, but the rest of us know it as the Sharpe ratio. It tells you what a portfolio returns relative to the amount of risk an investor assumes versus risk-free Treasuries.
Sharpe, 82, now is working on an issue related to retirement income that he calls “the thorniest problem in all of finance.”
You can stream or download the full conversation, including the podcast extras, on iTunes, SoundCloud, Overcast and Bloomberg. Our earlier podcasts can all be found on iTunes, SoundCloud and Bloomberg.
Next week, we speak with Daren Acemoglu, the professor of economics at the Massachusetts Institute of Technology, and author of "Why Nations Fail: The Origins of Power, Prosperity, and Poverty."
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