If the AM Growth Fund is considered to be well-diversified, which measure would be more appropriate in evaluating its risk/return performance?
A) The Treynor measure.
B) The Sharpe ratio.
C) Jensen's Alpha measure.作者: Darien 时间: 2011-7-13 13:34
Me 2.
Why C is wrong?作者: aidebaobao 时间: 2011-7-13 13:34
Sharpe Ratio and Jensen's Alpha considers Total Risk(Systematic Risk and + Unsystematic Risk).
AM considers only systematic risk(Well-Diversified), Treynor Measure is appropriate.作者: liangfeng 时间: 2011-7-13 13:34
overdope Wrote:
-------------------------------------------------------
> Sharpe Ratio and Jensen's Alpha considers Total
> Risk(Systematic Risk and + Unsystematic Risk).
> AM considers only systematic
> risk(Well-Diversified), Treynor Measure is
> appropriate.
Jensen's alpha measures excess return given systematic risk, beta, of the portfolio but Treynor measures unit excess return per systematic risk taken. Jensen's provides the total alpha (excess return) generated.作者: Unforseen 时间: 2011-7-13 13:34
overdope Wrote:
-------------------------------------------------------
> Sharpe Ratio and Jensen's Alpha considers Total
> Risk(Systematic Risk and + Unsystematic Risk).
> AM considers only systematic
> risk(Well-Diversified), Treynor Measure is
> appropriate.
I tot Jensen's is the same as Treynor, which only takes Beta, systematic risk?作者: justin88 时间: 2011-7-13 13:34
Agree with Tega作者: bodhisattva 时间: 2011-7-13 13:34
ole give away the punchline before the joke作者: jmh530 时间: 2011-7-13 13:34
If the portfolio is well diversified, Then
Total risk should be approximately equal to systematic risk.
I assume all three should be the same.作者: lcw77 时间: 2011-7-13 13:34
hellscream Wrote:
-------------------------------------------------------
> Xtra Wrote:
> --------------------------------------------------
> -----
> > Lol... Why is this quiz called Jensen's alpha
> >
> >
> > A
>
>
> Because choosing A is easy, but why C is wrong?
I had that same question and thought the same thing. Schweser gave a great reason that it was Treynor was risk adjusted.
I guess subtracting out Beta(MKT - RFR) provides more information than dividing by beta on risk.
The more you read the CFA curriculum the more you realize Schweser has not been updated in a long time and their interpretations are just that interpretations of the problems.作者: mp3bu 时间: 2011-7-13 13:34
If it is well diversified then no difference between A or B, and even C should be close.
SO all three are the same作者: Colum 时间: 2011-7-13 13:34
I think the idea here is to choose the BEST answer. Yes, the Treynor Ratio and Jensen's Alpha both use Beta and both basically tell you the same thing, which is a risk adjusted return. But the question is asking us which is most appropriate for evaluating "risk/return performance" So the measure we are looking for is a ratio of risk/return or return/risk. Jensen's Alpha is not a ratio, but the Treynor Ratio is. Treynor is giving us the return per unit of systematic risk. So because Treynor is a ratio, A is a BETTER answer than C.
As for answer B, I don't think we can assume there is no systematic risk despite the description of the fund as "well-diversified." I may be wrong, but I don't think we can ever formally say that ALL non-systematic risk has been diversified away...unless we are holding all securities in the market.作者: bpdulog 时间: 2011-7-13 13:34
Why it is not a sharp ratio ..if all unsyst risks are diversified ..so the sharp ratio should equal Treynor ratio ...right?作者: skycfa 时间: 2011-7-13 13:34
Jensen gives no sense of scale? Only an alpha, but we don't know whether the alpha was generated over a low beta or high beta?
