| William F. Sharpe | |
|---|---|
| Born | June 16, 1934 Boston, Massachusetts, U.S. |
| Nationality | United States |
| Fields | Economics |
| Institutions | William F. Sharpe Associates Stanford University UC Irvine University of Washington 1961-68 RAND Corporation |
| Alma mater | University of California, Berkeley, transferred UCLA |
| Doctoral advisor | Armen Alchian Harry Markowitz (unofficial) |
| Doctoral students | Howard Sosin |
| Known for | Capital asset pricing model Sharpe ratio |
| Notable awards | Nobel Memorial Prize in Economic Sciences (1990) |
William Forsyth Sharpe (born June 16, 1934) is the STANCO 25 Professor of Finance, Emeritus at Stanford University's Graduate School of Business and the winner of the 1990 Nobel Memorial Prize in Economic Sciences.
He was one of the originators of the Capital Asset Pricing Model, created the Sharpe ratio for risk-adjusted investment performance analysis, contributed to the development of the binomial method for the valuation of options, the gradient method for asset allocation optimization, and returns-based style analysis for evaluating the style and performance of investment funds.
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William Sharpe[1] was born on June 16, 1934 in Boston, Massachusetts. As his father was in the National Guard, the family moved several times during World War II, until they finally settled in Riverside, California. Sharpe spent the rest of his childhood and teenage in Riverside, also completing most of his pre-college education there. In 1951 he enrolled at the University of California at Berkeley planning to pursue a degree in medicine.[2] However, in the first year he decided to change his focus and moved to the University of California at Los Angeles to study Business Administration. Finding that he was not interested in accounting, Sharpe had a further change in preferences, finally majoring in Economics. During his undergraduate studies, two professors had a large influence on him: Armen Alchian, a professor of economics who became his mentor, and J. Fred Weston, a professor of finance who first introduced him to Harry Markowitz's papers on portfolio theory. While at UCLA, Sharpe became a member of the Phi Beta Kappa Society. He earned a B.A. from UCLA in 1955 and a M.A. in 1956.
After graduation, in 1956, Sharpe joined the RAND Corporation. While doing research at RAND, he also started work for a Ph.D. at UCLA under the supervision of Armen Alchian. While searching for a dissertation topic, J. Fred Weston suggested him to ask Harry Markowitz at RAND. Working closely with Markowitz, which in practice "filled a role similar to that of dissertation advisor",[1] Sharpe earned his Ph.D. in 1961 with a thesis on a single factor model of security prices, also including an early version of the Security Market Line.
In 1961, after finishing his graduate studies, Sharpe started teaching at the University of Washington. He started research on generalizing the results in his dissertation to an equilibrium theory of asset pricing, work that yielded the Capital asset pricing model. He submitted the paper describing CAPM to the Journal of Finance in 1962. However, ironically, the paper[3] which would become one of the foundations of financial economics was initially considered irrelevant and rejected from publication. Sharpe had to wait for the editorial staff to change until finally getting the paper published in 1964.[4] At the same time, the CAPM was independently developed by John Lintner, Jan Mossin, and Jack Treynor.
In 1968, Sharpe moved to the University of California at Irvine but stayed there for only two years and, in 1970 he moved again, this time to Stanford University. While teaching at Stanford, Sharpe continued research in the field of investments, in particular on portfolio allocation and pension funds. He also became directly involved in the investment process by offering consultance to Merrill Lynch and to Wells Fargo, thus having the opportunity to put in practice the prescriptions of financial theory. In 1986, in collaboration with the Frank Russell Company, he founded Sharpe-Russell Research, a firm specialized in providing research and consultancy on asset allocation to pension funds and foundations. In 1989 he retired from teaching, retaining the position of Professor Emeritus of Finance at Stanford, choosing to focus on his consulting firm, now named William F. Sharpe Associates.
Sharpe served as a President of the American Finance Association and he is a trustee of the Economists for Peace and Security. He is also the recipient of a Doctor of Humane Letters, Honoris Causa from DePaul University, a Doctor Honoris Causa from the University of Alicante (Spain), a Doctor Honoris Causa from the University of Vienna and the UCLA Medal, UCLA's highest honor.
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