Chapter 18, Problem 16PS

Summary Introduction

(a)

To calculate:

The sharpe ratios for the fund and index i.e. Miranda fund and S&P $500$ .

Introduction:

Sharpe ratio is a ratio which helps in computing the reward-to-volatility ratio. This ratio gives an understanding of the incremental return which an investor will expect to earn on every $1\%$ increase in the value of standard deviation.

Summary Introduction

(b)

To calculate:

The ${\text{M}}^2$ measure for the fund and index i.e. Miranda fund and S&P $500$

Introduction:

  ${\text{M}}^2$ is a measure which helps in ascertaining the adjusted return in regard to the associated risk with the portfolio.

Summary Introduction

(c)

To calculate:

The treynor ratios for the fund and index i.e. Miranda fund and S&P $500$ .

Introduction:

Treynor ratio is a ratio which helps in computing the reward-to-volatility ratio. This ratio provides excess return over expected in regard to systematic risk i.e. beta.

Summary Introduction

(d)

To calculate:

The Jensen measure i.e. alpha for the fund i.e. Miranda fund.

Introduction:

The alpha shows the performance of portfolio in relation to benchmark.