William F. Sharpe facts for kids
Quick facts for kids
William F. Sharpe
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Sharpe in 2007
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| Born | June 16, 1934 Boston, Massachusetts, U.S.
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| Alma mater | University of California, Los Angeles (BA, MA, PhD) |
| Known for | Capital asset pricing model Sharpe ratio |
| Awards | Nobel Memorial Prize in Economic Sciences (1990) |
| Scientific career | |
| Fields | Economics |
| Institutions | William F. Sharpe Associates Stanford University University of California, Irvine University of Washington 1961–68 RAND Corporation |
| Doctoral advisor | Armen Alchian Harry Markowitz (unofficial) |
| Doctoral students | Howard Sosin |
William Forsyth Sharpe (born June 16, 1934) is an American economist. He is a retired professor of finance at Stanford University's Graduate School of Business. In 1990, he won the Nobel Memorial Prize in Economic Sciences.
Sharpe helped create the capital asset pricing model (CAPM). This model helps people understand how much risk they are taking when investing. He also invented the Sharpe ratio, which measures how well an investment performs compared to its risk. His work also helped develop ways to figure out the value of options and how to choose the best mix of investments.
Early Life and Education
William Sharpe was born on June 16, 1934, in Boston, Massachusetts. His family moved several times when he was young because his father was in the National Guard during World War II. They eventually settled in Riverside, California. William finished high school in Riverside in 1951.
He first went to the University of California, Berkeley to study medicine. But he soon changed his mind and moved to the University of California, Los Angeles (UCLA) to study business. He found he wasn't interested in accounting, so he switched again, finally choosing economics. Two professors at UCLA greatly influenced him: Armen Alchian, who became his mentor, and J. Fred Weston. Mr. Weston introduced him to ideas about how to manage investments from Harry Markowitz. William Sharpe earned his bachelor's degree in 1955, his master's in 1956, and his PhD in 1961, all from UCLA.
Starting His Career
After finishing his master's degree in 1956, Sharpe joined the RAND Corporation. This was a research organization where he also started working on his PhD. He worked closely with Harry Markowitz, who helped him a lot with his research. In 1961, Sharpe earned his PhD with a paper about how stock prices are related to each other.
Working as a Professor
In 1961, after getting his PhD, Sharpe began teaching at the University of Washington. There, he continued his research on how to price different investments. This work led to the Capital asset pricing model (CAPM). He sent his paper about CAPM to a finance magazine in 1962. Surprisingly, the paper was first rejected because people thought it wasn't important! But it was finally published in 1964. At the same time, other economists like John Lintner and Jan Mossin also developed similar ideas.
In 1968, Sharpe moved to the University of California, Irvine, and then to Stanford University in 1970. At Stanford, he kept researching investments, especially how to choose the best mix of investments for people and pension funds. He also advised companies like Merrill Lynch and Wells Fargo. This allowed him to use his financial ideas in the real world. In 1986, he started a research firm called Sharpe-Russell Research. This company helped pension funds decide how to invest their money. His work in 1988 also led to a way to understand an investment fund's style, called returns-based style analysis.
Later Career and Achievements
Sharpe retired from teaching in 1989 but remained a professor at Stanford. He focused on his consulting firm, which was renamed William F. Sharpe Associates. In 1996, he helped start a company called Financial Engines. This company uses technology to help people manage their retirement investments.
Financial Engines grew very large, helping many people with their retirement plans. In 2018, the company was bought for $3 billion.
William Sharpe has received many honors. He was the president of the American Finance Association. He also received special degrees from several universities, including DePaul University and UCLA. Since 2009, Sharpe has supported "adaptive asset allocation" strategies. These strategies try to use recent market trends to make better investment choices, aiming for higher returns and less risk.
Selected Books
- Portfolio Theory and Capital Markets (1970)
- Asset Allocation Tools (1987)
- Fundamentals of Investments (with Gordon J. Alexander and Jeffrey Bailey, 2000)
- Investments (with Gordon J. Alexander and Jeffrey Bailey, 1999)
See also
In Spanish: William Sharpe para niños
- Modern portfolio theory
