CONNECT WITH LEARNSMART FOR BODIE: ESSE
CONNECT WITH LEARNSMART FOR BODIE: ESSE
11th Edition
ISBN: 2819440196239
Author: Bodie
Publisher: MCG
bartleby

Concept explainers

Question
Book Icon
Chapter 18, Problem 12CP
Summary Introduction

(a)

To determine:

The appropriateness of using the market index, benchmark normal portfolio and median of the manager universe for evaluating the performance of the acme pension plan

Introduction:

Market Index: It is the weighted average of several stocks from a section of the stock market. It is calculated on the selected stock's price.

Benchmark: In this, from all the stocks that a manager usually chooses, weighted as the manager would weight them in a portfolio.

b(i)

Summary Introduction

To determine:

The importance and computation of the performance measure of Sharpe ratio, Treynor ratio and Jensen's alpha.

Introduction:

Sharpe performance: It's a measure of risk adjusted portfolio performance. It is a ratio which helps in computing the reward-to-volatility ratio.

Treynor Performance: It is developed by Jack Treynor. It is also known as reward to volatility ratio.

Jensen's alpha: It is based on capital asset pricing model. As per this measure, the return is similar to risk-free rate including the systematic risk on excess return of the market.

b(ii)

Summary Introduction

To determine:

The assumption of each measure in regard to the relevant risks taken by them for evaluating the portfolio performance.

Introduction:

Systematic risk is the risk given by beta.

Total risk is the risk given by standard deviation.

Blurred answer
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Text book image
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:9781260013962
Author:BREALEY
Publisher:RENT MCG
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Text book image
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Text book image
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Text book image
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education