Exam 22: Evaluation of Investment Performance: a Global Concept

The __________ indicates the percentage of the variance in the portfolio's returns explained by the market's returns.

The following information is to be used to answer questions 13-17. \begin{array}{llcc}\underline{ \text { SD }} &\underline{ \text {Beta }}&\underline{ \text {alpha }}&\underline{ \text { \mathrm{R}^{2}}} \\ \text { Fund 11.97 } &1.0&1.3&0.95\\ \text { Fund 22.94 } &0.8&0.6^*&0.80\\ \text { Fund 33.82} &1.2&-3.5&0.90\\ \text { Fund 44.70 } &1.4&4.2&065\\ &\\\end{array} $\text { *Significant at the } 5 \text { percent level }$ -Which of these funds had the highest performance as determined by Jensen's performance measure?

Modigliani-squared is a return adjusted for volatility that allows returns between portfolios to be compared.

Sharpe's measure is a ratio of excess return to total risk.

Explain the characteristic line in excess return form for the Jensen alpha measure.

The reward-to-volatility ratio measures the excess return per unit of

GIPS requires compliant history for at least 10 years, or since inception, if less than 10 years.

The time-weighted rate of return is affected by any cashflows to the portfolio.

A retired couple's assets consist of a $100,000 house, a $400,000 securities portfolio, a $15,000 car, and personal effects. Would they be more concerned with the Sharpe performance measure or the Treynor performance measure for the portfolio?

was created to obtain global acceptance of a standard for fair presentation.

The use of RVOL implies that total risk is the proper measure of risk in performance evaluation.

The purpose of performance attribution is to assess the risk of a portfolio.

According to Jensen's differential return measure, what is alpha?

One approach to style analysis which uses the stocks in a portfolio to describe the fund's allocation among asset classes is known as:

Sharpe's RVAR measures the slope of the line between RF and the portfolio being evaluated. If the line is plotted between RF and a market index, where would superior portfolios lie? Inferior portfolios?

The --------------------- is the legitimate alternative to a portfolio that accurately reflects the objectives of the portfolio owners.

The following information is to be used to answer questions 13-17. \begin{array}{llcc}\underline{ \text { SD }} &\underline{ \text {Beta }}&\underline{ \text {alpha }}&\underline{ \text { \mathrm{R}^{2}}} \\ \text { Fund 11.97 } &1.0&1.3&0.95\\ \text { Fund 22.94 } &0.8&0.6^*&0.80\\ \text { Fund 33.82} &1.2&-3.5&0.90\\ \text { Fund 44.70 } &1.4&4.2&065\\ &\\\end{array} $\text { *Significant at the } 5 \text { percent level }$ -Which of these four funds had the largest total risk?

Jensen's measure of performance is based on the CAPM.

Jensen's alpha measures the contribution of the portfolio manager.

Investors who have all their assets in one portfolio of securities should rely on the Sharpe measure rather than the Treynor measure.