Exam 22: Measuring Risks and Returns of Portfolio Managers

Benchmark portfolios are used to:

According to a study by John McDonald published in the Journal of Financial and Quantitative Analysis, portfolio managers generally:

Fund managers normally compare their performance to:

The only difference between the Sharpe and Treynor approaches is that the Treynor approach evaluates excess returns based on:

Adherence to objectives as measured by risk exposure is important in evaluating a fund manager because risk is one of the variables a money manager can directly control.

Under the Jensen approach, if the market rate of excess returns is 5.75%, a portfolio with beta of .9 should provide excess returns of:

Sharpe uses beta as a measure of risk.

The degree of association between the independent and dependant variables is measured by:

The wise money manager will generally adhere strictly to stated objectives.

Under what conditions might a return of 15% be actually worse than a return of 10%?

Treynor uses beta as a measure of risk.

Buying a mutual fund is a good way to diversify.

One primary reason for the long-term average performance of mutual funds in general is:

To achieve effective diversification, a fund must have 80 to 100 different securities.

Under the Sharpe, Treynor, and Jensen approaches, the return measurement must be compared to risk in some form.

In an index fund,

A positive alpha is an indication of:

Using the Jensen approach, the adequacy of a portfolio manager's performance cannot be judged against the market line.

In examining the performance of fund managers, the return measure commonly used is:

The least risk exposure would be appropriate for a mutual fund which: