Sharpe, William F.

▪ American economist

in full  William Forsyth Sharpe 

born June 16, 1934, Cambridge, Massachusetts, U.S.

      American economist who shared the Nobel Prize for Economics in 1990 with Harry M. Markowitz (Markowitz, Harry M.) and Merton H. Miller (Miller, Merton H.). Their early work established financial economics as a separate field of study.

      Sharpe received his Ph.D. in economics from the University of California at Los Angeles in 1961. He was influenced by the theories of Markowitz, whom he met while working at the RAND Corporation (1957–61). Later, Sharpe taught economics at the University of Washington in Seattle (1961–68) and at Stanford University (from 1970) until he retired from teaching to head his own investment consulting firm.

      Sharpe received the Nobel Prize for his “capital asset pricing model,” a financial model that explains how securities (security) prices reflect potential risks (risk) and returns. Sharpe's theory showed that the market pricing of risky assets enabled them to fit into an investor's portfolio because they could be combined with less-risky investments. His theories led to the concept of “beta,” a measurement of portfolio risk. Investment analysts frequently use a beta coefficient to compare the risk of one stock against the risk of the broader stock market.

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