In: Finance
Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Her portfolio holds only stocks found in the S&P 500 and cash.
Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market-timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P’s allocation between stocks and cash during the period was a constant 96% and 4%, respectively. The risk-free rate of return was 3%.
One-Year Trailing Returns | ||||||
Miranda Fund | S&P 500 | |||||
Return | 9.5 | % | −21.8 | % | ||
Standard deviation | 36.0 | % | 41 | % | ||
Beta | 1.30 | 1.00 | ||||
a. What are the Sharpe ratios for the Miranda Fund and the S&P 500? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 4 decimal places.)
Sharpe Ratio | |
Miranda fund | |
S&P 500 | |
b. What is the M2 measure for Miranda? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
M2 Measure %
c. What is the Treynor measure for the Miranda Fund and the S&P 500? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 4 decimal places.)
Treynor Measure | |
Miranda | |
S&P 500 | |
d. What is the Jensen measure for the Miranda Fund? (Do not round intermediate calculations. Round your answers to 4 decimal places.)
Jensen measure