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Q27. Peter Michaels, CFA, works at Composite Consulting, and is in charge of evaluating the performance of various portfolio managers. His main tasks are to measure and evaluate the sources of return that can be attributed to manager performance. Michaels understands the importance of incorporating risk into his analyses, but realizes the limitations associated with some performance measurement techniques in accomplishing that particular objective. Michaels begins the evaluation of a number of managers by examining return information from both the portfolio being evaluated and its designated benchmark.
Michaels has the following return information for the AM Growth Fund:
|
|
AM Growth Fund |
S& 500 |
|
Return |
14% |
12% |
|
Standard deviation |
25% |
18% |
|
Beta |
1.15 |
1.00 |
If the risk-free rate is currently 4%, which of the following represent the calculation for the Sharpe Ratio and the Treynor measure, respectively, for the AM Growth Fund?
A) 0.08 and 0.02.
B) 0.40 and 0.09.
C) 0.56 and 0.12.
Q28. 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.
Q29. The following details are available for the Prime Growth Fund, the S& 500 (market), and the U.S. T-bill rate (risk-free rate) for the 5-year period from 1995 to 2000.
|
|
Prime Growth |
S& 500 |
T-bill |
|
Average annual rate of return |
12.00% |
9.50% |
3.00% |
|
Standard deviation of returns |
22% |
14% |
|
|
Beta |
1.12 |
|
|
|
Sharpe ratio |
0.41 |
0.46 |
|
|
Treynor measure |
.080 |
.065 |
|
|
Jensens alpha |
0.22 |
- |
|
|
R2 |
0.29 |
|
|
Based on the results, we can conclude that the Prime Growth Fund:
A) seems to have under-performed the market based on total risk basis but out-performed the market based on a systematic risk-adjusted basis.
B) out-performed the market on a total risk-adjusted basis.
C) contains virtually no unsystematic risk.
Q30. Bill Smith is evaluating the performance of four large-cap equity portfolios: Funds A, B, C and D. As part of his analysis, Smith computed the Sharpe ratio and the Treynor measure for all four funds. Based on his finding, the ranks assigned to the four funds are as follows:
|
Fund |
Treynor Measure Rank |
Sharpe Ratio Rank |
|
A |
1 |
4 |
|
B |
2 |
3 |
|
C |
3 |
2 |
|
D |
4 |
1 |
The difference in rankings for Funds A and D is most likely due to:
A) different benchmarks used to evaluate each fund’s performance.
B) a lack of diversification in Fund A as compared to Fund D.
C) a difference in risk premiums.
Q31. The following figures provide performance data for two managers, Cumulus Managers and Saturn Managers. The benchmark return is 12% and its standard deviation is 25%. The risk-free rate is 4.2%.
|
|
Cumulus |
Saturn |
|
Return |
15.0% |
18.0% |
|
Standard Deviation |
29.0% |
33.0% |
|
Beta |
0.9 |
1.3 |
Which of the following would be the most appropriate conclusion regarding their relative performance, using the M2 measure and the Treynor ratio?
A) Saturn is the superior manager using both the M2 measure and the Treynor ratio.
B) Cumulus is the superior manager using both the M2 measure and the Treynor ratio.
C) Saturn is the superior manager using the M2 measure but not the Treynor ratio.
Q32. 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.
|
|
|
Fund A |
Fund B |
Fund C |
Fund D |
Market |
|
Return |
|
7.80% |
7.20% |
8.20% |
7.60% |
7.00% |
|
Beta |
|
1.10 |
0.90 |
1.20 |
1.05 |
1.00 |
|
Return Std.Dev. |
|
4.00% |
3.44% |
4.15% |
3.50% |
3.55% |
|
Tracking Error* |
|
0.82% |
0.45% |
1.02% |
0.67% |
|
|
*Tracking error is the standard deviation of the difference between the Fund Return and the Market Index Return |
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 firm’s management wants to advertise how, using the market as a benchmark, these funds have had returns higher than that benchmark. The firm’s management asks Carter and Walters to compute several performance measures such as the Treynor measure, the Sharpe ratio, and the M2 measure. The firm’s 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 firm’s management recently instituted policies for manager continuation. For each manager, the firm’s 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 doesn’t plan to make any modifications to the custom benchmark.
The portfolio with the highest Sharpe ratio is:
A) Fund D.
B) Fund A.
C) Fund C. | 
发表于 2009-4-10 14:46
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