Sharpe received the Nobel Prize for his "capital asset pricing
model," a financial model that can explain how securities prices
reflect risks and potential returns. Sharpe's theory stressed how the
market pricing of risky assets enables them to fit into an investor's
portfolio because they can be made to blend with less risky investments.
Sharpe's theories led to the concept of "beta," a measurement
of portfolio risk not overturned by clever diversifying of investments.
Investment analysts frequently use "beta" to compare the risk
of holding one mix of stocks with that of stocks in general.
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