The only difference between the Sharpe and Treynor approaches is that the Treynor approach evaluates excess returns based on:
A)total risk.
B)unsystematic risk.
C)systematic risk.
D)None of the above

Question

Quizplus · Accepted Answer

The Treynor approach evaluates excess returns based on systematic risk, also known as market risk. In contrast, the Sharpe approach evaluates excess returns based on total risk, which includes both systematic and unsystematic risk. Therefore, the only difference between the two approaches is the factor used to evaluate excess returns, making choice (C) the correct answer.

The Only Difference Between the Sharpe and Treynor Approaches Is