Exam 18: Portfolio Performance Evaluation

Consider the theory of active portfolio management. Shares A and B have the same positive alpha and the same non-systematic risk. Share A has a higher beta than share B. You should want ________ in your active portfolio.

It is very hard to statistically verify abnormal fund performance because of all except which one of the following?

What is the contribution of security selection to relative performance?

A managed portfolio has a standard deviation equal to 22% and a beta of 0.9 when the market portfolio's standard deviation is 26%. The adjusted portfolio P________ needed to calculate the M² measure will have ________ invested in the managed portfolio and the rest in T-bonds.

In the Treynor-Black model, the weight of each analysed security in the portfolio should be proportional to its ________.

The average returns, standard deviations and betas for three funds are given below along with data for the S&P 500 index. The risk-free return during the sample period is 6%. You wish to evaluate the three mutual funds using the Treynor measure for performance evaluation. The fund with the highest Treynor measure of performance is ________.

The portfolio that contains the benchmark asset allocation against which a manager will be measured is often called ________.

Shares A and B have alphas of .01 and betas of .90. Share A has a residual variance of .020 while share B has a residual variance of .016. If Share A represents 2% of an active portfolio, share B should represent ________ of an active portfolio.

A portfolio generates an annual return of 13%, a beta of 0.7 and a standard deviation of 17%. The market index return is 14% and has a standard deviation of 21%. What is the M² measure of the portfolio if the risk-free rate is 5%?

Perfect timing ability is equivalent to having ________ on the market portfolio.

The risk-free rate, average returns, standard deviations and betas for three funds and the S&P500 are given below. What is the T² measure for Portfolio A?

A portfolio generates an annual return of 17%, a beta of 1.2 and a standard deviation of 19%. The market index return is 12% and has a standard deviation of 16%. What is the M² measure of the portfolio if the risk-free rate is 4%?

The M² measure is a variant of ________.

Consider the theory of active portfolio management. Shares A and B have the same beta and the same positive alpha. Share A has higher non-systematic risk than share B. You should want ________ in your active portfolio.

Suppose that over the same period two portfolios have the same average return and the same standard deviation of return, but Portfolio A has a higher beta than Portfolio B. According to the Sharpe measure, the performance of Portfolio A ________.

Henriksson found that, on average, betas of funds ________ during market advances.

The comparison universe is ________.

Portfolio managers Paul Martin and Kevin Krueger each manage $1 000 000 funds. Paul Martin has perfect foresight and the call option value of his perfect foresight is $150 000. Kevin Krueger is an imperfect forecaster and correctly predicts 50% of all bull markets and 70% of all bear markets. The value of Kevin Krueger's imperfect forecasting ability is ________.

A market timing strategy is one where asset allocation in the share market ________ when one forecasts the share market will outperform treasury bonds.

A portfolio generates an annual return of 13%, a beta of 0.7 and a standard deviation of 17%. The market index return is 14% and has a standard deviation of 21%. What is the Treynor measure of the portfolio if the risk-free rate is 5%?