Elsie is an investor considering investing in an actively managed equity fund. The Fund has a return of 8%; the risk-free rate was 2% and the market portfolio returned 8%. The Fund had a target Beta of 1.40, but was actually 1.30. The fund had a standard deviation of 20%, and the market had a standard deviation of 12%. a. Calculate - Sharpe ratio b. Calculate - Treynor Ratio c. Discuss whether Elsie should consider using the Sharpe ratio or the Treynor ratio to discuss portfolio performance
Elsie is an investor considering investing in an actively managed equity fund. The Fund has a return of 8%; the risk-free rate was 2% and the market portfolio returned 8%. The Fund had a target Beta of 1.40, but was actually 1.30. The fund had a standard deviation of 20%, and the market had a standard deviation of 12%. a. Calculate - Sharpe ratio b. Calculate - Treynor Ratio c. Discuss whether Elsie should consider using the Sharpe ratio or the Treynor ratio to discuss portfolio performance
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
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Elsie is an investor considering investing in an actively managed equity fund. The Fund has a return of 8%; the risk-free rate was 2% and the market portfolio returned 8%. The Fund had a target Beta of 1.40, but was actually 1.30. The fund had a standard deviation of 20%, and the market had a standard deviation of 12%.
a. Calculate - Sharpe ratio
b. Calculate - Treynor Ratio
c. Discuss whether Elsie should consider using the Sharpe ratio or the Treynor ratio to discuss portfolio performance
d. Define the Sortino ratio and explain its advantage
E)Using Fama Decomposition, calculate:
- Return from Investor's risk
- Return from Manager's risk
- Return from Diversification
- Return from Net Selectivity
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