The following information pertains to three portfolios over a 6-year period. Market returns (%) and the risk-free
Question:
The following information pertains to three portfolios over a 6-year period. Market returns (%) and the risk-free returns (%) are also provided.
Period | Market Return | Risk free return | Portfolio 1 | Portfolio 2 | Portfolio 3 |
1 | 0.10 | 0.05 | 0.15 | 0.16 | 0.17 |
2 | 0.02 | 0.06 | 0.09 | 0.11 | 0.13 |
3 | 0.20 | 0.08 | 0.26 | 0.28 | 0.18 |
4 | 0.30 | 0.09 | 0.34 | 0.36 | 0.42 |
5 | -0.04 | 0.08 | -0.02 | -0.03 | -0.16 |
6 | 0.16 | 0.07 | 0.16 | 0.17 | 0.17 |
Without doing any calculations, answer the following:a) Which portfolio would you expect to have the highest beta?
b) Which portfolio would you expect to have the highest standard deviation of returns?
c) Which portfolio would you expect to have the highest Sharpe ratio?
Answer the following questions based on your calculations and knowledge of the topic:
d) Rank the three portfolios based on commonly used performance measures.
e) Overall, which portfolio exhibited the best performance based on a composite set of performance measures? Comment on your findings.
f) If you wanted to find more details of the relative performance of the three portfolios what further analysis would you do? What additional details would you seek?
Materials Science and Engineering An Introduction
ISBN: 978-0470419977
8th edition
Authors: William D. Callister Jr., David G. Rethwisch