Difficulties in adjusting average returns for risk present a host of issues, as the proper measure...
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Difficulties in adjusting average returns for risk present a host of issues, as the proper measure of risk may not be obvious, and risk levels may change along with portfolio composition. The following data is given for a particular sample period: (a) Average return Beta Standard deviation Portfolio P 35 % 1.2 42 % Market M 28% 1.0 Full-screen Snip 30 % Calculate the following performance measures for portfolio P and the market: Sharpe, Jensen (alpha) and Treynor. The Treasury bill rate during the period was 6 %. By which measures did portfolio P outperform the market? What do these measures mean or imply? Explain. (15 marks) Difficulties in adjusting average returns for risk present a host of issues, as the proper measure of risk may not be obvious, and risk levels may change along with portfolio composition. The following data is given for a particular sample period: (a) Average return Beta Standard deviation Portfolio P 35 % 1.2 42 % Market M 28% 1.0 Full-screen Snip 30 % Calculate the following performance measures for portfolio P and the market: Sharpe, Jensen (alpha) and Treynor. The Treasury bill rate during the period was 6 %. By which measures did portfolio P outperform the market? What do these measures mean or imply? Explain. (15 marks)
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The Sharpe ratio Jensens alpha and Treynor ratio are all measures of riskadjusted performance that can be used to compare the performance of a portfol... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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