Exam 24: Portfolio Performance Evaluation

In a particular year, Hoosier Mutual Fund earned a return of 1% by making the following investments in asset classes: Weight Return Bonds 20\% 5\% Stocks 80\% 0\% The return on a bogey portfolio was 2%, calculated from the following information. Weight Return Bonds (Lehman Brother Index) 50\% 5\% Stacks (S\&P 500 Index) 50\% -1\% The contribution of selection within markets to the Hoosier Fund's total abnormal return was

Suppose you own two stocks, A and B. In year 1, stock A earns a 2% return and stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11% return. __________ has the higher arithmetic average return.

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: Sooner Market Portfolio Average return 20\% 11\% Standard deviations of returns 44\% 19\% Beta 1.8 1.0 Residual standard deviation 2.0\% 0.0\% The risk-free return during the sample period was 3%. Calculate the Jensen measure of performance evaluation for Sooner Stock Fund.

The M-squared measure considers

Suppose the risk-free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%, and the average return is 18%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

The following data are available relating to the performance of Seminole Fund and the market portfolio: Seminole Market Portfolio Average return 18\% 14\% Standard deviations of returns 30\% 22\% Beta 1.4 1.0 Residual standard deviation 4.0\% 0.0\% The risk-free return during the sample period was 6%. If you wanted to evaluate the Seminole Fund using the M² measure, what percent of the adjusted portfolio would need to be invested in T-Bills?

To determine whether portfolio performance is statistically significant requires

Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a lower beta than portfolio B. According to the Treynor measure, the performance of portfolio A

Suppose two portfolios have the same average return and the same standard deviation of returns, but Buckeye Fund has a higher beta than Wild Cat Fund. According to the Sharpe measure, the performance of Buckeye Fund

Rodney holds a portfolio of risky assets that represents his entire risky investment. To evaluate the performance of Rodney's portfolio, in which order would you complete the steps listed?I) Compare the Sharpe measure of Rodney's portfolio to the Sharpe measure of the best portfolio.II) State your conclusions.III) Assume that past security performance is representative of expected performance.IV) Determine the benchmark portfolio that Rodney would have held if he had chosen a passive strategy.

Suppose you purchase one share of the stock of Mayfair Company at the beginning of year 1 for $50. At the end of year 1, you receive a $1 dividend and buy one more share for $72. At the end of year 2, you receive total dividends of $2 (i.e., $1 for each share) and sell the shares for $67.20 each. The time-weighted return on your investment is

A pension fund that begins with $500,000 earns 15% the first year and 10% the second year. At the beginning of the second year, the sponsor contributes another $300,000. The dollar-weighted and time-weighted rates of return, respectively, were

In a particular year, Hoosier Mutual Fund earned a return of 1% by making the following investments in asset classes: Weight Return Bonds 20\% 5\% Stocks 80\% 0\% The return on a bogey portfolio was 2%, calculated from the following information. Weight Return Bonds (Lehman Brother Index) 50\% 5\% Stacks (S\&P 500 Index) 50\% -1\% The contribution of asset allocation across markets to the Hoosier Fund's total abnormal return was

The dollar-weighted return on a portfolio is equivalent to

Bad investment decisions can be made in a category of funds due to poor performing funds not being considered. This is called ___________,

You want to evaluate three mutual funds using the Jensen measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 18%. The average returns, standard deviations, and betas for the three funds are given below. Average ReturnResidual Standard Deviation Beta Fund A 17.6\% 10\% 1.2 Fund B 17.5\% 20\% 1.0 Fund C 17.4\% 30\% 0.8 The fund with the highest Jensen measure is

A portfolio manager's ranking within a comparison universe may not provide a good measure of performance because

The M² measure was developed by

Which of the following is NOT a characteristic used by Morningstar to measure performance and assign a star rating?

The following data are available relating to the performance of Seminole Fund and the market portfolio: Seminole Market Portfolio Average return 18\% 14\% Standard deviations of returns 30\% 22\% Beta 1.4 1.0 Residual standard deviation 4.0\% 0.0\% The risk-free return during the sample period was 6%. Calculate the M² measure for the Seminole Fund.