One year has passed since DOCH Advisors first started operations. Their overall equity portfolio has returned 28.2% versus a return of 22.4% for the JSE All-share index. The standard deviation of the JSE All-share index is 2%, and Julie Kadzo, a practicing financial analyst has estimated the standard deviation of DOCH Advisors' equity portfolio at 4%. The portfolio has a beta of 1.35; the risk-free rate is 4%. A major DOCH client is attempting to evaluate the relative performance of the DOCH equity fund. The client is unsure whether the Sharpe measure or the Treynor measure is appropriate for the DOCH portfolio. 1. Using the Sharpe and the Treynor measures, determine how the DOCH portfolio has performed relative to the JSE All-share index. 2. Assume that using the Sharpe ratio to measure performance, the JSE All-share index outperformed the DOCH portfolio, but using the Treynor measure, the DOCH portfolio outperformed the JSE All-share index. Explain, in terms of systematic and unsystematic risks, how this change in ranking could have occurred.

1. Compute the- squared measure for the DOCH portfolio, assuming management uses the market as the benchmark.
2. Exercise: Explain, in terms of relative returns and volatility, the circumstances under which -squared for DOCH portfolio would equal- squared for the market.