Consider the sharpe and treynor performance measures

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19. Consider the Sharpe and Treynor performance measures. When a pension fund is large and has many managers, the __________ measure is better for evaluating individual managers while the __________ measure is better for evaluating the manager of a small fund with only one manager responsible for all investments. A. Sharpe, Sharpe B. Sharpe, Treynor C. Treynor, Sharpe D. Treynor, Treynor E. Both measures are equally good in both cases. The Treynor measure is the superior measure if the portfolio is a small portion of many portfolios combined into a large investment fund. The Sharpe measure is superior if the portfolio represents the investor's total risky investment position. Difficulty: Moderate 24-10
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Chapter 24 - Portfolio Performance Evaluation 20. Suppose you purchase 100 shares of GM stock at the beginning of year 1, and purchase another 100 shares at the end of year 1. You sell all 200 shares at the end of year 2. Assume that the price of GM stock is $50 at the beginning of year 1, $55 at the end of year 1, and $65 at the end of year 2. Assume no dividends were paid on GM stock. Your dollar-weighted return on the stock will be __________; your time-weighted return on the stock. In the dollar-weighted return, the stock's performance in the second year, when 200 shares are held, has a greater influence on the overall dollar-weighted return. The time-weighted return ignores the number of shares held. Difficulty: Moderate 21. Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2, the alpha is 1%, and the average return is 14%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as 1% = 14% - [4% + 1.2(x - 4%)]; x = 11.5%. Difficulty: Difficult 24-11
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Chapter 24 - Portfolio Performance Evaluation 22. Suppose the risk-free return is 3%. The beta of a managed portfolio is 1.75, the alpha is 0%, and the average return is 16%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as 0% = 16% - [3% + 1.75(x - 3%)]; x = 10.4%. Difficulty: Difficult 23. Suppose the risk-free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%, and the average return is 18%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as A. 12% B. 14% C. 15% D. 16% E. none of the above 3% = 18% - [6% + 1.5(x - 6%)]; x = 12%. Difficulty: Difficult 24-12
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Chapter 24 - Portfolio Performance Evaluation
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  • Spring '10
  • HAMZA
  • Valuation, Portfolio Performance Evaluation

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