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LOS q, (Part 2): Explain how a portfolio's alpha and beta are incorporated into these measures.
Q1. Which of the following statements regarding the Sharpe ratio is most accurate?
A) The denominator of the Sharpe ratio is standard deviation which is comprised partly of systematic risk called beta.
B) Beta is not a component of the Sharpe ratio.
C) The measure of risk used in the denominator of the Sharpe ratio is standard deviation also known as unsystematic risk.
Q2. A portfolio manager has a well diversified portfolio and they are trying to determine whether or not to add a particular stock to the portfolio to increase the portfolio’s overall risk adjusted return. To decide whether or not to add the stock the manager will back test the portfolio based on historical data of the stock and the portfolio. The relevant measure to use in comparing the results of the back tested model comparing the results of the portfolio before and after the addition of the stock would be the:
A) Sharpe ratio.
B) Information ratio.
C) Treynor measure. | 
发表于 2009-4-10 14:58
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