Two Investment Advisors Are Comparing Performance

Multiple Choice

Two investment advisors are comparing performance.Advisor A averaged a 20% return with a portfolio beta of 1.5 and Advisor B averaged a 15% return with a portfolio beta of 1.2.If the T-bill rate was 5% and the market return during the period was 13%,which advisor was the better stock picker?

A) Advisor A was better because he generated a larger alpha
B) Advisor B was better because he generated a larger alpha
C) Advisor A was better because he generated a higher return
D) Advisor B was better because he achieved a good return with a lower beta