Asked by Samantha Allen on Jul 12, 2024
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Suppose two portfolios have the same average return and the same standard deviation of returns, but Buckeye Fund has a higher beta than Husker Fund. According to the Sharpe measure, the performance of Buckeye Fund
A) is better than the performance of Husker Fund.
B) is the same as the performance of Husker Fund.
C) is poorer than the performance of Husker Fund.
D) cannot be measured as there are no data on the alpha of the portfolio.
Sharpe Measure
The Sharpe Measure assesses the risk-adjusted return of an investment, comparing its excess return over the risk-free rate to its standard deviation of returns.
Standard Deviation
A measure of the dispersion or variability of a set of values, used in finance to gauge the risk associated with an investment's return.
Beta
An indicator of the degree of variability or systematic risk associated with a security or portfolio relative to the broader market.
- Become proficient in understanding and applying mathematical formulas to calculate risk-adjusted metrics like the Treynor measure, Sharpe measure, and Jensen's alpha.
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Learning Objectives
- Become proficient in understanding and applying mathematical formulas to calculate risk-adjusted metrics like the Treynor measure, Sharpe measure, and Jensen's alpha.
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