$2$

Suppose two mutual funds have the same

average return and the same standard deviation

of return. However, fund A has a higher beta

than fund B$.$ The risk$-$free rate is $4\%.$ Under the

Sharpe measure, the performance of fund $A$

$$

$$

is the same as the performance of fund $B$

$$

is better than the performance of fund $B$

$$

cannot be measured since there is no data on the

$$

alpha of the fund

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is poorer than the performance of fund B

$$

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$3$

is often considered to be a measure of

fund managers' skill.

Sharpe ratio

Beta

Variance

Alpha

$8$:$04$