busterbluth

Based on the explanation provided, the Sharpe of the stock being added is not equal to the Treynor of the stock since the stock exhibits unsystematic risk. The diversified portfolio, on the other hand, should not be affected by which ratio is used, for the reason you gave. But when the stock is added, unsystematic risk will be diversified away, so why use the Sharpe ratio when looking at the stock’s contribution to the portfolio? I think that’s why Treynor is best here.

Swanand

Haha nice man, I feel slightly better since you seem to know a lot. If it makes you feel better, I’m going to start “managed futures” for the first time after work today. I wish I could say I was starting on GIPS. : P

redskins44

You don’t know how much under the water I am, mate… Just trying to drink it through! It’s slow poison.
I am taking this half a day off from study and get back to it probably Sat with GIPS (yes, I still have that pending)

kickthatcfa

For well-studied people such as yourself, this will be over in less than a month. For people like me, hopefully in 1 year + 1 month. : P

dvilayphet

Correct nashwbe - C is it! With that happy note, let’s get out of work for some happy hour! TGIF.
When is all this going to get over, again, please remind me?

brain_wash_your

Question ID#: 100904

Palantir

Hahah well after that nice explanation you gave, I’m gonna say C is the right answer for this one.

pawn

Which of the following measures would be the most appropriate one to use when comparing the results of two portfolios in which each portfolio contains only a few number of stocks representing a limited number of industries?
A)
Treynor measure.
B)
Information ratio.
C)
Sharpe ratio.

cfalevel2011

the same thing could have been said with using Sharpe Portfolio * Correlation (Asset,Portfolio) < Sharpe Asset.
Can you give me the question id please?

RMontgomery

not sure where Schweese is doing its squeezing from.
I don’t recall where in the curriculum they talk about using Treynor to ever add Asset A to Portfolio B.
They do talk of Sharpe for that.
Are they saying
Treynor Portfolio < Treynor Asset -> go ahead and add…. need to see curriculum confirmation for that anywhere.