Asked by NIDHI THOMAS on Jul 04, 2024
Verified
The Modigliani M2 measure and the Treynor T2 measure
A) are identical.
B) are nearly identical and will rank portfolios the same way.
C) are nearly identical, but might rank portfolios differently.
D) are somewhat different; M2 can be used to rank portfolios, but T2 cannot.
E) are somewhat different; T2 can be used to rank portfolios, but M2 cannot.
Rank Portfolios
The process of arranging portfolios in order according to a certain criterion, such as return or risk.
Nearly Identical
Refers to items or entities that are almost the same in appearance, characteristics, or quality, with very minor differences.
- Comprehend various metrics for assessing the performance of a portfolio.
Verified Answer
SA
Suliman AL-SUMAIRIJul 09, 2024
Final Answer :
C
Explanation :
The Modigliani measure and the Treynor measure are similar in that they both evaluate the risk-adjusted returns of portfolios. However, they use different risk metrics (Modigliani uses standard deviation, while Treynor uses beta), which can lead to different rankings of portfolios despite their similarities.
Learning Objectives
- Comprehend various metrics for assessing the performance of a portfolio.
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