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Consider the following data for a particular sample period when returns were high:                             &n

  1. Consider the following data for a particular sample period when returns were high:

                                           Portfolio P                 Market Portfolio

Average Return               32%                            28%

Beta                                   1.3                              1.0        

Standard Deviation        40%                            30%

Calculate Jensen’s Alpha, the Sharpe ratio and Treynor’s ratio for both portfolio P and the Market. The T-bill rate during this period was 5%. By which measures did portfolio P outperform the market?

Solutions

Expert Solution

By which measures did portfolio P outperform the market?

Thumb Rule

Jensen Alpha = Higher return the better

Sharpe ratio = Higher Rate the better

Treynor ratio = Higher Rate the better

Portfolio P has not outperformed the market portfolio in any measure

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jeff jeffy answered 1 year ago
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