Exam 18: Portfolio Performance Evaluation

The risk-free rate, average returns, standard deviations and betas for three funds and the S&P500 are given below. What is the M² measure for Portfolio B?

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 Sharpe measure for performance evaluation. The fund with the highest Sharpe measure of performance is ________.

Portfolio performance is often decomposed into various subcomponents such as the return due to ________. I. broad asset allocation across security classes II. sector weightings within equity markets III. security selection with a given sector The decision that contributes most to the fund performance is:

A passive benchmark portfolio is ________. I. a portfolio where the asset allocation across broad asset classes is neutral and not determined by forecasts of performance of the different asset classes II. one where an indexed portfolio is held within each asset class III. often called the bogey

Probably the biggest problem with evaluating portfolio performance of actively managed funds is the assumption that ________.

The market timing form of active portfolio management relies on ________ forecasting and the security selection form of active portfolio management relies on ________ forecasting.

What is the contribution of asset allocation to relative performance?

Which one of the following performance measures is the Sharpe measure?

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

A fund has excess performance of 1.5%. In looking at the fund's investment breakdown you see that the fund overweighed equities relative to the benchmark and the average return on the fund's equity portfolio was slightly lower than the equity benchmark return. The excess performance for this fund is probably due to ________.

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 correct measure of timing ability for Kevin Krueger is ________.

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 Jensen's alpha of the portfolio if the risk-free rate is 5%?

The table presents the actual return of each sector of the manager's portfolio in column (1), the fraction of the portfolio allocated to each sector in column (2), the benchmark or neutral sector allocations in column (3) and the returns of sector indexes in column (4). What was the bogey's return in the month?

If an investor is a successful market timer, his distribution of monthly portfolio returns will ________.