Two Investment Advisers Are Comparing Performance

Multiple Choice

Two investment advisers are comparing performance. Adviser A averaged a 20% return with a portfolio beta of 1.5, and adviser 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 adviser was the better stock picker?

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