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William Sharpe

WHO'S WHO IN FINANCE

William Sharpe is a renowned economist and Nobel laureate. He is known for his groundbreaking work in the financial field where he developed the Sharpe Ratio used to measure risk-adjusted returns. This has become an extremely popular metric investors use to understand and manage their risk exposure. 

Sharpe also developed the Capital Asset Pricing Model (CAPM). This has revolutionized how investors can look at and compare their investment opportunities by providing a system to zero in on the relationship between an available investment's risk and its anticipated return. 

In addition to the Nobel Prize, William Sharpe has also earned many other achievements and accolades including:

  • Ph.D., M.A., and B.A. in Economics from the University of California at Los Angeles
  • Doctorate of Humane Letters, Honoris Causa from DePaul University
  • Doctor Honoris Causa from the University of Alicante (Spain)
  • Doctor Honoris Causa from the University of Vienna (Austria)
  • Doctor of Science, Economics
  • Honoris Causa from the London Business School
  • The UCLA Medal, UCLA’s highest honor.

Sharpe also has an Indexing Lifetime Achievement Award which has been named in his honor, and he has also been awarded the Financial Analysts Journal Graham and Dodd Award for his financial writing. You can learn more about his achievements here. 

Sharpe suggests that investors should consider their individual risks outside the financial markets when creating investment plans, saying, “Diversify, diversify, diversify! The closer you come to holding the entire market portfolio, the higher your expected return for the risk you take. Economize by avoiding unnecessary investment expenses, especially management fees and trading costs. Personalize by taking into account the things that make your situation unique, especially the risks you face outside the financial markets. As an extreme example, imagine that all you eat is chocolate bars. In that case, you'd want to invest more in the stock of candy makers so that if they raise prices, your food will cost more but your stock will go up. Finally, contextualize. Remember, if you bet that market prices are wrong [by investing heavily in a single stock or sector], you have to be able to justify why you're right and the market isn't. Asset prices are not determined by someone from Mars.” (https://money.cnn.com/2007/05/21/pf/sharpe.moneymag/index.htm)

Works Cited:

Baldridge, Rebecca. "The Capital Asset Pricing Model (CAPM).

Zweig, Jason. "The Man Who Explained It All: Bill Sharpe's Pioneering Theory on the Interplay Between Investment Risk and Return." Money Magazine, 6 July 2007, 4:40 PM EDT, https://money.cnn.com/2007/05/21/pf/sharpe.moneymag/index.htm.