Chapter6: Risk And Return
Section6.7: The Relationship Between Risk And Return In The Capital Asset Pricing Model
Problem 2ST
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Transcribed Image Text:b. Out of the performance measures you calculated in part a., which one would you use under each
of the following circumstances:
i.
You want to select one of the funds as your risky portfolio.
ii.
You want to select one of the funds to be mixed with the rest of your portfolio,
currently composed solely of holdings in the market-index fund.
iii.
You want to select one of the funds to form an actively managed stock portfolio.
Transcribed Image Text:a. Using the data in the table below and calculate the following performance measures.
i. Sharpe ratio
ii. Treynor measure
iii. Jensen's alpha
iv. M-squared measure
v. T-squared measure, and
vi. Appraisal ratio (information ratio)
Average Standard
Beta
Unsystematic
Fund
Return
Deviation Coefficient
Risk
А
0.220
0.017
0.800
0.900
1.200
1.100
0.240
0.200
0.170
0.450
C
0.290
0.380
0.074
D
0.260
0.290
0.026
E
0.180
0.320
0.121
0.153
0.120
0.000
0.400
0.460
0.900
F
1.100
G
0.250
0.700
0.190
0.180
Market
0.220
1.000
Risk-free
return
0.050
0.000
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