Exam 24: Portfolio Performance Evaluation

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: Sooner Market Portfolio Average return 20\% 11\% Standard deviations of returns 44\% 19\% Beta 1.8 1.0 Residual standard deviation 2.0\% 0.0\% The risk-free return during the sample period was 3%. Calculate the information ratio for Sooner Stock Fund.

Most professionally managed equity funds generally

The comparison universe is not

__________ developed a popular method for risk-adjusted performance evaluation of mutual funds.

Suppose a particular investment earns an arithmetic return of 10% in year 1, 20% in year 2, and 30% in year 3. The geometric average return for the period will be

The following data are available relating to the performance of Scooner Stock Fund and the market portfolio: Scooner Market Portfolio Average return 19\% 12\% Standard deviations of returns 35\% 15\% Beta 1.5 1.0 Residual standard deviation 3.0\% 0.0\% The risk-free return during the sample period was 6%. What is the Sharpe measure of performance evaluation for Scooner Stock Fund?

Suppose you own two stocks, A and B. In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. Which stock has the higher geometric average return?

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 Sharpe's measure of performance for Tiger Fund.

The Sharpe, Treynor, and Jensen portfolio performance measures are derived from the CAPM,

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 4%. 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 18\% 38\% 1.6 Fund B 15\% 27\% 1.3 Fund C 11\% 24\% 1.0 S\&P 500 10\% 22\% 1.0 The fund with the highest Sharpe measure is

What assumption about risk-adjusted techniques for measuring performance poses a potential problem?

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 5%. 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 23\% 30\% 1.3 Fund B 20\% 19\% 1.2 Fund C 19\% 17\% 1.1 S\&P 500 18\% 15\% 1.0 The investment with the highest Sharpe measure is

The Value Line Index is an equally-weighted geometric average of the returns of about 1,700 firms. The value of an index based on the geometric average returns of three stocks where the returns on the three stocks during a given period were 32%, 5%, and −10%, respectively, is

What method of measuring performance is similar to the mean/variance based Sharpe ratio?

Suppose you purchase 100 shares of Coca Cola 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 Coca Cola 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 Coca Cola stock. Your dollar-weighted return on the stock will be __________ your time-weighted return on the stock.

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 Jensen's measure of performance for Monarch Stock Fund.

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

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 total abnormal return on the Roll Tide managed portfolio was

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: Sooner Market Portfolio Average return 20\% 11\% Standard deviations of returns 44\% 19\% Beta 1.8 1.0 Residual standard deviation 2.0\% 0.0\% The risk-free return during the sample period was 3%. What is the Sharpe measure of performance evaluation for Sooner Stock Fund?

You want to evaluate three mutual funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 19%. The average returns, residual standard deviations, and betas for the three funds are given below. Average ReturnResidual Standard Deviation Beta Fund A 20\% 4.00\% 0.8 Fund B 21\% 1.025\% 1.0 Fund C 23\% 1.20\% 1.2 The fund with the highest information ratio measure is