William F. Sharpe is a professor emeritus at Stanford University and a 1990 Nobel laureate in economics. He developed the Capital Asset Pricing Model (CAPM) in his 1964 paper “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.”
Key contributions
- CAPM (1964): established that the expected return on a security is a linear function of its market beta, and that the market portfolio is mean-variance efficient. This became the foundational model for all of modern asset pricing.
- Sharpe ratio: the ratio of excess return to standard deviation, now the standard measure of risk-adjusted performance.
Legacy
The CAPM’s empirical failures (documented by Fama and French) motivated all subsequent multi-factor models, but its conceptual framework — systematic risk, diversification, the market portfolio — remains central to finance.