Which of the following statements about the evaluation of portfolio performance is FALSE?

A) When using the Sharpe ratio, the portfolio with the highest capital allocation line (CAL) slope is the best portfolio.

B) In the decomposition of portfolio performance, a naive portfolio is constructed with its standard deviation set equal to the total risk of the manager's portfolio that is being evaluated.

C) Beta is unstable over time and is dependant on the specific market index used in its calculation.

D) The security market line (SML) represents an active investment strategy when Jensen's Alpha is used as the measure for portfolio performance.

 Answer and Explanation

Of the Sharpe, Treynor, and Jensens Alpha measures, when measuring the risk/return performance of actively managed portfolios, which is the most appropriate to use?

A) Treynor measure.

B) Jensen's Alpha.

C) Sharpe ratio.

D) All three measures are equally appropriate.

Of the Sharpe, Treynor, and Jensens Alpha measures, when dealing with a sector fund which will be added to the investors overall larger portfolio, which is the most relevant measurement technique to assess relative risk/return performance?

A) Treynor measure.

B) Sharpe ratio.

C) Jensen's Alpha.

D) All three measures are equally appropriate.

The Sharpe ratio, Treynor measure, the M² measure and Jensens Alpha techniques all measure the risk/return performance of portfolios. Which of the following statements about these measurement techniques is least accurate?

A) The Sharpe ratio measures the slope of the capital allocation line (CAL), with the lowest slope having the most desirable risk/return combination.

B) While the Treynor measure computes excess return per unit of risk, Jensen's Alpha measures differential return for a given level of risk.

C) Using the capital market line the M2 compares the account's return to the market return and is a comparative measure.

D) The distinction between the Sharpe and Treynor measures is that Sharpe uses standard deviation of the portfolio as the risk measure, whereas Treynor uses the portfolio's beta.

Which of the following measures used to evaluate the performance of a portfolio manager is/are NOT subject to the assumptions of the capital asset pricing model (CAPM)?

A) Jensen's alpha.

B) Treynor measure.

C) Sharpe measure.

D) Jensen's alpha and the Treynor measure.

Which of the following risk measures is NOT dependent on capital asset pricing model (CAPM)?

A) Jensen measure.

B) Treynor measure.

C) Sharpe measure.

D) None of the above.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.  

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.  

                                                         Equity Fund            S& 500

                           Return                             21%                  24%           

                           Standard Deviation            19%                  17%

                           Beta                              1.05                    1.00

                           Risk-free rate is 4.50%

The Sharpe ratio for the equity fund is:

A) 0.76.

B) 0.87.

C) 0.98.

D) 0.84.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.  

                                                               Equity Fund                 S& 500

               Return                                            13%                          10.5%              

               Standard Deviation                           22%                          20%

               Beta                                             1.21                          1.00

               Risk-free rate is 5.25%

The Treynor measure for the equity fund is:

A) 0.064.

B) 0.570.

C) 0.048.

D) 0.071.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.  

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.  

                                                      Equity Fund            S& 500

                  Return                                  27%                   29%        

                  Standard Deviation                33%                    20%

                  Beta                                    0.95                   1.00

                  Risk-free rate is 4.00%

The Treynor measure and the Sharpe ratio, in that order, for the S& 500 are:

A) 0.18 and 1.11.

B) 0.25 and 1.25.

C) 0.56 and 1.01.

D) 0.33 and 0.97.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.

Equity Fund S& 500

Return 32% 26%

Standard Deviation 41% 29%

Beta 0.98 1.00

Risk-free rate is 6.00%

The difference between the Sharpe ratio for the equity fund and the Sharpe ratio for the S& 500 is the:

The difference between the Sharpe ratio for the equity fund and the Sharpe ratio for the S& 500 is the:

A) S& 500 is 0.09 higher.

B) equity fund is 0.06 lower.

C) S& 500 is 0.04 lower.

D) equity fund is 0.51 higher.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.

Equity Fund S& 500

Return -12% -16%

Standard Deviation 15% 19%

Beta 1.18 1.00

Risk-free rate is 6.00%

The difference between the Treynor measure for the equity fund and the Treynor measure for the S& 500 is:

The difference between the Treynor measure for the equity fund and the Treynor measure for the S& 500 is:

A) 0.17.

B) 0.07.

C) 0.15.

D) 0.21.

Which of the following statements about fund performance is TRUE?

A) When analyzing the performance of a bond portfolio the manager should be evaluated relative to a style universe. Focusing on maturity ranges or a particular market segment is not one of the accepted style universes.

B) An equity fund had a return over the past year of 17% and a standard deviation of returns of 12%. During this period the risk-free return was 3%. The Sharpe ratio for the fund was 1.17.

C) An investment style focusing on small capitalization stocks is likely to result in a portfolio with a low beta.

D) A fund had total excess return of 1.82%. Of the total, 1.60% was due to the style of the fund that was specified by the sponsor, and 0.22% was due to security selection. The amount of the excess return that should be credited to the fund manager is 1.82%.

An analyst has generated the following information about risk/return performance using the Sharpe ratio and the Treynor measure:

An analyst has generated the following information about risk/return performance using the Sharpe ratio and the Treynor measure:

                                                            Equity Fund         S& 500

                           Sharpe ratio                     0.47                  0.42

                           Treynor measure              0.31                  0.34

Which of the following statements about the relative risk/return performance of the funds is TRUE?  The:

Which of the following statements about the relative risk/return performance of the funds is TRUE?  The:

A) Treynor measure shows the fund outperformed the S& 500 on a systematic risk-adjusted basis.

B) Sharpe ratio shows the equity fund underperformed the S& 500 on a systematic risk-adjusted basis.

C) Treynor measure shows the fund underperformed the S& 500 on a total risk-adjusted basis.

D) Sharpe ratio shows the equity fund outperformed the S& 500 on a total risk- adjusted basis.

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.   Using Jensens Alpha to measure the risk/return performance of the Equity fund and the S& 500, which of the following conclusions is TRUE?  The:

An analyst has gathered the following information about the performance of an equity fund and the S& 500 index over the same time period.   Using Jensens Alpha to measure the risk/return performance of the Equity fund and the S& 500, which of the following conclusions is TRUE?  The:

                                                         Equity Fund            S& 500

                   Return                                  23%                     27%           

                   Standard Deviation                15%                     19%

                   Beta                                   1.09                    1.00

                   Risk-free rate is 3.50%

A) S& 500 outperformed the equity fund by 3.24%.

B) S& 500 underperformed the equity fund by 2.67%.

C) Equity fund outperformed the S& 500 by 5.04%.

D) Equity fund underperformed the S& 500 by 6.12%.

Which of the following statements about risk/return investment manager performance measures is FALSE?

A) When measuring the performance of an equity fund, if the Sharpe ratio is 0.55, and the Treynor measure is 0.47, the difference is attributable to unsystematic (company-specific) risk.

B) The Treynor measure includes company-specific risk as part of its performance measurement.

C) The Sharpe measure includes company-specific risk as part of its performance measurement.

D) Jensen's Alpha measures equity fund performance relative to what the portfolio would have returned had it been on the security market line (SML).

The following performance data for an actively managed portfolio and the S& 500 Index is reported:

	Actively Managed Portfolio	S& 500
Return	50%	20%
Standard deviation	18%	15%
Beta	1.1	1.0

Risk-free rate = 6 percent.

Determine the Sharpe measure, Treynor measure, and Jensen's alpha for the actively managed portfolio.

A) Sharpe measure = 1.04; Treynor measure = 0.14; Alpha = 0.04.

B) Sharpe measure = 2.44; Treynor measure = 0.40; Alpha = 0.29.

C) Sharpe measure = 1.05; Treynor measure = 0.17; Alpha = 0.04.

D) Sharpe measure = 1.06; Treynor measure = 0.12; Alpha = 0.02.

Based on the results from determining the Sharpe measure, Treynor measure, and Jensen's alpha for the actively managed portfolio, does the portfolio manager outperform or underperform the S& 500 index?

A) Sharpe measure → underperform; Treynor measure → outperform; Alpha → outperform

B) Sharpe measure → outperform; Treynor measure → underperform; Alpha → underperform.

C) Sharpe measure → outperform; Treynor measure → outperform; Alpha → outperform.

D) Sharpe measure → underperform; Treynor measure → underperform; Alpha → underperform.

The ratio of return to systematic risk for an investment portfolio is 0.70, while the market is 0.50. This information suggests that the portfolio:

A) exhibits superior performance because the return per unit of risk is above that of the market.

B) exhibits inferior performance because it has more risk than the market.

C) is too diversified, and some securities should be sold to bring the portfolio in line with the market.

D) is not diversified enough, and more securities should be purchased to bring the portfolio in line with the market.

The Sharpe Ratio is correctly defined as a measure of a funds:

A) excess return earned compared to its systematic risk.

B) excess return earned compared to its total risk.

C) return earned compared to its unsystematic risk.

D) return earned compared to its total risk.

If a portfolio had an alpha of −10 bps, then the portfolio:

A) had less risk than the market.

B) earned 10 bps less than the market on a risk-adjusted basis.

C) earned 10 bps less than the market.

D) had a return of 10 bps.

The Treynor measure is correctly defined as a measure of a funds:

A) return earned compared to its systematic risk.

B) return earned compared to its unsystematic risk.

C) excess earned compared to its systematic risk.

D) excess return earned compared to its total risk.

Jensens alpha for a portfolio measures the:

A) funds return in excess of the required rate of return given the unsystematic risk of the portfolio.

B) difference between a funds return and the market return.

C) funds return in excess of the required rate of return given the systematic risk of the portfolio.

D) difference between the funds Sharpe ratio and Treynor measure.

The following information is available for the Trumark Fund:

• The Trumark Fund has an average annual return of 12 percent over the last five years.
• Trumark has a beta value of 1.35.
• Trumark has a standard deviation of returns of 16.80 percent.
• During the same time period, the average annual T-bill rate was 4.5 percent.
• During the same time period, the average annual return on the S& 500 portfolio was 18 percent.

What is the Sharpe ratio for the Trumark Fund?

A) 5.56.

B) 0.45.

C) 0.80.

D) 7.50.

A) 0.45.

B) 0.80.

C) 0.06.

D) -0.04.

[此贴子已经被作者于2008-9-17 18:19:55编辑过]

接着上一帖的题

Using the Sharpe Measure, rank the four funds in terms of the risk-adjusted excess returns starting with the highest performing fund and ending with the lowest performing fund:

A) Bould, Adams, Dixon, Winterburn.

B) Adams, Bould, Winterburn, Dixon.

C) Bould, Adams, Winterburn, Dixon.

D) Adams, Bould, Dixon, Winterburn.

[此贴子已经被作者于2008-9-17 18:26:57编辑过]

Bill Carter, CFA and Bob Walters, CFA are analyzing the recent return of several funds they have been assigned to manage. The funds are Fund A, Fund B, Fund C, and Fund D as indicated in the table below.

The risk-free rate of return for the relevant period was 3.5%.

The management of the firm that Carter and Walters works for is very proud of the fact that all of the four funds had a higher return than the overall market as indicated on the table. The firms management wants to advertise how, using the market as a benchmark, these funds have had returns higher than that benchmark. The firms management asks Carter and Walters to compute several performance measures such as the Treynor measure, the Sharpe ratio, and the M² measure. The firms management also asks for the construction of quality control charts.

In going over the results, Carter is skeptical of the results and using the market as a benchmark because that benchmark was not specified in advance. Walters says that he is skeptical too because it is not clear if the market is an appropriate benchmark in all cases. They want to proceed cautiously because the firms management recently instituted policies for manager continuation. For each manager, the firms management has set up the null hypothesis that a manager has no skill and the alternative hypothesis is that the manager has skill in adding value.

Carter and Walters discuss constructing a custom benchmark for some of these or other funds they might manage. A few of these funds hold cash positions to take advantage of good investment opportunities when they arise. Carter says that the benchmark they construct should include cash in the weighting scheme. They set aside a few weeks to construct a preliminary benchmark for several funds. Walters wants to be thorough, because once they construct the benchmark, he doesnt plan to make any modifications to the custom benchmark.

A) all of the funds except C only.

B) B only.

C) none of the funds.

D) all of the funds.

A) both Carter and Walters are correct.

B) both Carter and Walters are wrong.

C) Carter is correct and Walters is wrong.

D) Carter is wrong and Walters is correct.

A) Carter and Walters are both correct.

B) Carter is correct and Walters is wrong.

C) Carter and Walters are both wrong.

D) Carter is wrong and Walters is correct.

A) keeps an unskilled manager.

B) hires a second manager to help a doubtful manager.

C) uses a course filter rather than a fine filter in the evaluation process.

D) fires a skilled manager.