Which ratio measures excess return per unit of risk measured by beta?

The Treynor Ratio is designed to measure the excess return earned on an investment for each unit of risk taken, as defined by beta. Beta is a measure of systematic risk, which reflects the sensitivity of an asset's returns to movements in the market as a whole.

The formula for the Treynor Ratio is calculated as the difference between the investment's return and the risk-free rate, divided by beta. This ratio effectively assesses how well the investment compensates for its exposure to systematic risk, allowing investors to evaluate the performance of their portfolios in comparison to the market.

In contrast, other ratios like the Sharpe Ratio considers total risk (which includes both systematic and unsystematic risk) rather than just systematic risk. Jensen's Alpha measures the performance of an investment against a benchmark considering beta, but it does not provide a ratio of return per unit of risk. The Sortino Ratio, similar to the Sharpe, focuses more on downside risk rather than overall risk as measured by beta.

Therefore, the Treynor Ratio is the appropriate choice for measuring excess return per unit of risk as dictated by its relationship to market movements, using beta as the risk measure.