- Rocco's portfolio returned 9.32% last year when the market returned 11.24%. The risk-free rate was 6.01% and the β for his portfolio as 1.09. From this scenario, we would conclude that:
- Rocco's portfolio was overvalued.
- Rocco's portfolio was undervalued and added alpha.
- There are insufficient data to draw a conclusion.
- The forecast return and the required return on Rocco's portfolio are equal.
- All of the following terms are associated with technical analysis, EXCEPT:
- Advance/Decline Line.
- Quick Ratio.
- Head and shoulders.
- Candlestick charting.
- Examples of expansionary monetary policy include all of the following, except:
- lowering reserve requirements.
- FOMC purchase of government securities.
- Increased government spending.
- Decrease in the discount rate.
- The creation of the investment policy statement forms the basis for:
- Strategic asset allocation.
- Tactical asset allocation.
- All of the foregoing.
- The Sharpe and Treynor ratios have all of the following in common, except:
- They measure risk-adjusted performance.
- They use total risk in the denominator.
- They may be used to evaluate individual securities as well as portfolios.
- The greater the ratios, the greater degree to which the performance is worth the risk.
- All of the following statements accurately describe the attributes of a benchmark, except:
Review Questions 13 - 18
Managing WealthLearn three ratios that will help you evaluate your investment returns.
TradingInvestopedia explains: These five performance ratios will help you measure how good your money manager is at increasing the value of your portfolio.
InvestingThe Treynor ratio measures returns in excess of what could have been earned on a riskless investment per unit of market risk.
InvestingThe Jensen index helps investors compare realized returns to what should've been achieved.
Managing WealthWhat is an investment benchmark and how is it used to evaluate the risk and return in a portfolio.
InvestingThe first tool for assessing portfolio performance while considering risk was the Treynor measure.
Managing WealthMinimizing risk while maximizing return with the right mix of securities is the key to achieving your optimal asset allocation.
Managing WealthHow to select and build a benchmark to measure the performance of your investment portfolio
Managing WealthThe Jensen measure is another tool investors use to include risk when measuring portfolio performance.
Managing WealthAchieve analytical efficiency by applying your evaluation to a key set of stocks.