The portfolio manager of the WorldValue fund reports an annual average return of 10% with a...
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The portfolio manager of the WorldValue fund reports an annual average return of 10% with a standard deviation of 24%. The market portfolio has annual average return of 12% and standard deviation equal to 20%. The risk free rate is 4%, and the market beta of the portfolio is 0.5. (a.) For this fund calculate the Sharpe ratio, the M2 measure, the Treynor measure, Jensen's alpha, and the Information ratio. [Note: The idiosyncratic variance is calculated as the portfolio variance minus beta squared times the variance of the market. (b.) Use the calculated measures to discuss under which circumstances the portfolio manager's performance may be considered superior. The portfolio manager of the WorldValue fund reports an annual average return of 10% with a standard deviation of 24%. The market portfolio has annual average return of 12% and standard deviation equal to 20%. The risk free rate is 4%, and the market beta of the portfolio is 0.5. (a.) For this fund calculate the Sharpe ratio, the M2 measure, the Treynor measure, Jensen's alpha, and the Information ratio. [Note: The idiosyncratic variance is calculated as the portfolio variance minus beta squared times the variance of the market. (b.) Use the calculated measures to discuss under which circumstances the portfolio manager's performance may be considered superior.
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To calculate the Sharpe ratio M2 measure Treynor measure Jensens alpha and Information ratio we need the following information Portfolio average retur... View the full answer
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