William Sharpe (b. 1934)

Who They Were

William Sharpe (born 1934) is an American economist and a foundational figure in financial economics. Working from the 1960s onward, he built on the portfolio ideas of his contemporaries to develop a theory of how risk should be priced in financial markets. He is best known for work that links the expected return on an asset to the risk it contributes to a diversified portfolio, a relationship that became a cornerstone of how investors and scholars think about risk and reward. In 1990 he shared the Sveriges Riksbank Prize in Economic Sciences with Harry Markowitz and Merton Miller for their pioneering work in the theory of financial economics. His frameworks remain widely taught and applied in finance today.

Key Contributions

Sharpe is most closely associated with the capital asset pricing model (CAPM), which describes how the expected return on an asset relates to its exposure to overall market risk. The model introduced the idea that investors are rewarded for bearing risk that cannot be diversified away, but not for risk that can be eliminated through diversification. This provided a simple, influential way to think about the price of risk and to compare investments. His name is also attached to a widely used measure of risk-adjusted return. His 1990 Nobel, shared with Harry Markowitz and Merton Miller, recognised this pioneering work in the theory of financial economics. Because the dates of his specific publications are not detailed here, this entry keeps to the well-established core of his contribution.

On EconRecall

American financial economist known for the capital asset pricing model, who shared the 1990 Nobel. Play the games that feature William Sharpe:

• Nobel Laureate Timeline