William F. Sharpe shared the 1990 Nobel Prize in Economics with Harry Markowitz and Merton Miller for pioneering work in the theory of financial economics.
Sharpe’s best-known contribution is the capital asset pricing model, or CAPM. It explains the relationship between expected return and systematic risk, helping investors understand why riskier investments may require higher expected returns.
He also developed the Sharpe ratio, a widely used measure that compares an investment’s excess return with its volatility. The ratio is commonly used to evaluate risk-adjusted performance.
The three 1990 laureates made related but distinct contributions. Markowitz developed portfolio theory, Miller helped establish modern corporate finance, and Sharpe developed influential tools for pricing assets and assessing investment performance.