Exam 24: Portfolio Performance Evaluation

Suppose you purchase one share of the stock of VM Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The time-weighted return on your investment is

Suppose you buy 100 shares of Abolishing Dividend Corporation at the beginning of year 1 for $80. Abolishing Dividend Corporation pays no dividends. The stock price at the end of year 1 is $100, $120 at the end of year 2, and $150 at the end of year 3. The stock price declines to $100 at the end of year 4, and you sell your 100 shares. For the four years, your geometric average return is

Suppose two portfolios have the same average return and the same standard deviation of returns, but Roll Tide Fund has a higher beta than Arc Fund. According to the Sharpe measure, the performance of Roll Tide Fund

Risk-adjusted mutual fund performance measures have decreased in popularity because

The following data are available relating to the performance of Tiger Fund and the market portfolio: Tiger Market Portfolio Average return 18\% 15\% Standard deviations of returns 25\% 20\% Beta 1.25 1.00 Residual standard deviation 2\% 0\% The risk-free return during the sample period was 7%. Calculate Treynor's measure of performance for Tiger Fund.

The following data are available relating to the performance of Tiger Fund and the market portfolio: Tiger Market Portfolio Average return 18\% 15\% Standard deviations of returns 25\% 20\% Beta 1.25 1.00 Residual standard deviation 2\% 0\% The risk-free return during the sample period was 7%. Calculate Jensen's measure of performance for Tiger Fund.

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: Monarch Market Portfolio Average return 16\% 12\% Standard deviations of returns 26\% 22\% Beta 1.15 1.00 Residual standard deviation 1\% 0\% The risk-free return during the sample period was 4%. Calculate Sharpe's measure of performance for Monarch Stock Fund.

The Modigliani M² measure and the Treynor T² measure

Studies of style analysis have found that ________ of fund returns can be explained by asset allocation alone.

The following data are available relating to the performance of Tiger Fund and the market portfolio: Tiger Market Portfolio Average return 18\% 15\% Standard deviations of returns 25\% 20\% Beta 1.25 1.00 Residual standard deviation 2\% 0\% The risk-free return during the sample period was 7%. What is the information ratio measure of performance evaluation for Tiger Fund?

The comparison universe is

Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Treynor measure, the performance of portfolio A

Investing in a mutual fund because of positive historical performance is a form of ___________,

Suppose two portfolios have the same average return and the same standard deviation of returns, but Buckeye Fund has a higher beta than Wild Cat Fund. According to the Treynor measure, the performance of Buckeye Fund

Suppose you purchase one share of the stock of VM Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar-weighted return on your investment is

Henriksson (1981) found that, on average, betas of funds __________ during market advances.

In a particular year, Roll Tide Mutual Fund earned a return of 15% by making the following investments in the following asset classes: Weight Return Bonds 10\% 6\% Stocks 90\% 16\% The return on a bogey portfolio was 10%, calculated as follows: Weight Return Bonds (Lehman Brother Index) 50\% 5\% Stacks (S\&P 500 Index) 50\% 15\% The contribution of selection within markets to total abnormal return was

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 6%. The average returns, standard deviations, and betas for the three funds are given below, as are the data for the S&P 500 Index. Average ReturnResidual Standard Deviation Beta Fund A 24\% 30\% 1.5 Fund B 12\% 10\% 0.5 Fund C 22\% 20\% 1.0 S\&P 500 18\% 16\% 1.0 The fund with the highest Sharpe measure is

In a particular year, Roll Tide Mutual Fund earned a return of 15% by making the following investments in the following asset classes: Weight Return Bonds 10\% 6\% Stocks 90\% 16\% The return on a bogey portfolio was 10%, calculated as follows: Weight Return Bonds (Lehman Brother Index) 50\% 5\% Stacks (S\&P 500 Index) 50\% 15\% The contribution of asset allocation across markets to the total abnormal return was

In a particular year, Hoosier Mutual Fund earned a return of 1% by making the following investments in asset classes: Weight Return Bonds 20\% 5\% Stocks 80\% 0\% The return on a bogey portfolio was 2%, calculated from the following information. Weight Return Bonds (Lehman Brother Index) 50\% 5\% Stacks (S\&P 500 Index) 50\% -1\% The total abnormal return on the Hoosier Fund's managed portfolio was