infinitybenzo

1. True
2. False
3. True

lcai

V6, page 174
However, it is pos- sible for the Sharpe ratio and M2 to identify a manager as not skillful, although the ex post alpha and the Treynor measure come to the opposite conclusion. This outcome is most likely to occur in instances where the manager takes on a large amount of nonsystematic risk in the account relative to the account’s systematic risk.

this is B portfolio, high non-systematic, worse diversification, therefore 2. is True.

Unforseen

true
true
cannot possibly be determined from the info given, thus false

zwjy

True
False
true

lcw77

True
True
False

bodhisattva

1) True: Systematic risk = market risk ONLY which is the measure of Treynor.
2) True: High sharpe means that it therefore diversified away most of the non-systematic risk
3) False: Cannot confirm that with the data provided. They could both have negative sharpe ratios

Zestt

to all who say 1. True:

beta of those portfolios can be same, only the return of B could be higher to have better Treynor....

IAmNeil

pfcfaataf Wrote:
-------------------------------------------------------
> to all who say 1. True:
>
> beta of those portfolios can be same, only the
> return of B could be higher to have better
> Treynor....


Beta measures systematic risk. Therefore if A has a lower Treynor measure, it has higher systematic risk, holding all else constant.

justin88

soddy1979 Wrote:
-------------------------------------------------------
> pfcfaataf Wrote:
> --------------------------------------------------
> -----
> > to all who say 1. True:
> >
> > beta of those portfolios can be same, only the
> > return of B could be higher to have better
> > Treynor....
>
>
> Beta measures systematic risk. Therefore if A has
> a lower Treynor measure, it has higher systematic
> risk, holding all else constant.

where does question say this "holding all else constant."?

Windjammer

Thank you all. This question is more complicated than I thought -- I should have added a line that assumes the returns of the two portfolios are then same. In this case,

1) True
2) True
3) False or undefined.

This is similar to essay(morning) question 11, 2009.

I agree with pfcfaataf, the answers will be different if the two betas are the same. The problem is complicated because there are many variables which could affect the results: beta, total risk(sigma), and returns.

*** One conclusion from this discussion: Portfolio A is more diversified.

The question like this could show up in the exam, and probably is more specific. Great discussion, thanks.