Five methods of performance appraisal in their ex post (historical) forms include: Jensen Alpha, Treynor Measure, Sharpe ratio, M^2 and Information ratio. I've memorized all the formulas and can do all the calculations accurately but don't know how to interpret the results. I know Jensen and Treynor use beta (systematic risk) in the formula whereas Sharpe and IR use standard deviation (total risk) in the formula but again how do you compare and translate the results. Can someone explain it in a plain language? |