Question 1

One approach to style analysis which uses the features of the stocks in the portfolio is known as:

Accepted Answer

A) returns-based style analysis. 
B) asset allocation style analysis. 
C) holdings-based style analysis. 
D) mix-based style analysis. 
A) returns-based style analysis. 
B) asset allocation style analysis. 
C) holdings-based style analysis. 
D) mix-based style analysis.

Question 2

The use of the Treynor measure implies that total risk is the proper measure of risk in performance evaluation.

Accepted Answer

A) True 
 B)False

Question 3

A portfolio with a beta of 0.8 earned a return of 13 percent when the risk-free rate was 6 percent and the market returned 9 percent.The portfolio's Treynor measure is closest to:

Accepted Answer

A) 1.8. 
B) 3.8. 
C) 5.0. 
D) 8.8. 
A) 1.8. 
B) 3.8. 
C) 5.0. 
D) 8.8.

Question 4

Which of the following measures uses the standard deviation and evaluates portfolio performance on the basis of both return and diversification.

Accepted Answer

A) Jensen's alpha 
B) Treynor measure 
C) M2 
D) Sharpe ratio 
A) Jensen's alpha 
B) Treynor measure 
C) M2 
D) Sharpe ratio

Question 5

Explain the characteristic line in excess return form for the Jensen alpha measure.

Accepted Answer

The chart has the excess return of the m

Question 6

The information in the following table is to be used to answer questions .
 $\begin{array}{|l|c|c|c|c|}
\hline \text { Fund } & \begin{array}{c}
\text { Standard } \
\text { Deviation }
\end{array} & \text { Beta } & \begin{array}{c}
\text { Jensen's } \
\text { Alpha }
\end{array} & \mathrm{R}^{2} \
\hline \text { Fund 1 } & 1.97 & 1.0 & 1.3 & 0.95 \
\hline \text { Fund 2 } & 2.97 & 0.8 & 0.6^{*} & 0.80 \
\hline \text { Fund 3 } & 3.82 & 1.2 & -3.5^{*} & 0.90 \
\hline \text { Fund 4 } & 3.50 & 1.4 & 4.2 & 0.65 \
\hline
\end{array}$ 
* Significant at the 5 percent level
-Which fund is least well-diversified?

Accepted Answer

A) Fund 1 
B) Fund 2 
C) Fund 3 
D) Fund 4 
A) Fund 1 
B) Fund 2 
C) Fund 3 
D) Fund 4

Question 7

Which of the following measures indicates the percentage of the variation in a portfolio's returns that is explained by variation in the market's returns?

Accepted Answer

A) Standard deviation 
B) Coefficient of determination 
C) Beta 
D) Alpha 
A) Standard deviation 
B) Coefficient of determination 
C) Beta 
D) Alpha

Question 8

GIPS requirements include: uniformity in certain performance calculations and disclosures;inclusion of all actual fee-paying discretionary portfolios in composites with similar objectives;compliant history for at least 5 years,or since inception if less than 5 years.

Accepted Answer

A) True 
 B)False

Question 9

The information in the following table is to be used to answer questions .
 $\begin{array}{|l|c|c|c|c|}
\hline \text { Fund } & \begin{array}{c}
\text { Standard } \
\text { Deviation }
\end{array} & \text { Beta } & \begin{array}{c}
\text { Jensen's } \
\text { Alpha }
\end{array} & \mathrm{R}^{2} \
\hline \text { Fund 1 } & 1.97 & 1.0 & 1.3 & 0.95 \
\hline \text { Fund 2 } & 2.97 & 0.8 & 0.6^{*} & 0.80 \
\hline \text { Fund 3 } & 3.82 & 1.2 & -3.5^{*} & 0.90 \
\hline \text { Fund 4 } & 3.50 & 1.4 & 4.2 & 0.65 \
\hline
\end{array}$ 
* Significant at the 5 percent level
-Based on Jensen's performance measure,which fund significantly outperformed?

Accepted Answer

A) Fund 1 
B) Fund 2 
C) Fund 3 
D) Fund 4 
A) Fund 1 
B) Fund 2 
C) Fund 3 
D) Fund 4

Question 10

Total risk of a portfolio is measured by the beta coefficient.

Accepted Answer

A) True 
 B)False

Question 11

GIPS was created to obtain global acceptance of a standard for fair presentation.

Accepted Answer

A) True 
 B)False

Question 12

If we are to assess performance carefully,we must do so on what kind of basis?

Accepted Answer

A) Quarterly 
B) Annual 
C) Attribution-weighted 
D) Risk-adjusted 
A) Quarterly 
B) Annual 
C) Attribution-weighted 
D) Risk-adjusted

Question 13

Superior portfolio performance can result from:

Accepted Answer

A) the ability to select undervalued securities,only. 
B) the ability to time market turns,only. 
C) superior selectivity or timing performance. 
D) neither superior selectivity nor timing because the market is too efficient. 
A) the ability to select undervalued securities,only. 
B) the ability to time market turns,only. 
C) superior selectivity or timing performance. 
D) neither superior selectivity nor timing because the market is too efficient.

Question 14

Time-weighted,as opposed to money-weighted,return captures the rate of return actually earned by the fund manager.

Accepted Answer

A) True 
 B)False

Question 15

The money-weighted rate of return is equivalent to the internal rate of return.

Accepted Answer

A) True 
 B)False

Question 16

According to Jensen's differential return measure,what is alpha?

Accepted Answer

A) The intercept of the SML line 
B) The intercept of the CML line 
C) A measure of the superior or inferior performance on a portfolio 
D) The actual excess return on a portfolio during one period 
A) The intercept of the SML line 
B) The intercept of the CML line 
C) A measure of the superior or inferior performance on a portfolio 
D) The actual excess return on a portfolio during one period

Question 17

Which of the following is true regarding M2?It produces a measure of portfolio performance that:

Accepted Answer

A) is adjusted for systematic risk. 
B) can be compared directly to the risk-free rate. 
C) can be compared directly with the market return. 
D) indicates what would be possible if the portfolio was fully leveraged. 
A) is adjusted for systematic risk. 
B) can be compared directly to the risk-free rate. 
C) can be compared directly with the market return. 
D) indicates what would be possible if the portfolio was fully leveraged.

Question 18

Discuss how constraints on portfolio managers affect the portfolio results.

Accepted Answer

Portfolios,such as mutual funds or pensi

Question 19

The Global Investment Performance Standards (GIPS®)were created by:

Accepted Answer

A) the CFA Institute. 
B) the Securities and Exchange Commission (SE
C) . 
C) Morningstar. 
D) the Federal Reserve. 
A) the CFA Institute. 
B) the Securities and Exchange Commission (SE
C) . 
C) Morningstar. 
D) the Federal Reserve.

Question 20

Which measure calculates performance relative to a benchmark portfolio?

Accepted Answer

A) Sortino ratio 
B) M2 
C) Information ratio 
D) Sharpe ratio 
A) Sortino ratio 
B) M2 
C) Information ratio 
D) Sharpe ratio

Exam 22: Evaluation of Investment Performance

One approach to style analysis which uses the features of the stocks in the portfolio is known as:

The use of the Treynor measure implies that total risk is the proper measure of risk in performance evaluation.

A portfolio with a beta of 0.8 earned a return of 13 percent when the risk-free rate was 6 percent and the market returned 9 percent.The portfolio's Treynor measure is closest to:

Which of the following measures uses the standard deviation and evaluates portfolio performance on the basis of both return and diversification.

Explain the characteristic line in excess return form for the Jensen alpha measure.

The information in the following table is to be used to answer questions . Fund Standard Deviation Beta Jensen's Alpha Fund 1 1.97 1.0 1.3 0.95 Fund 2 2.97 0.8 0. 0.80 Fund 3 3.82 1.2 -3. 0.90 Fund 4 3.50 1.4 4.2 0.65 * Significant at the 5 percent level -Which fund is least well-diversified?

Which of the following measures indicates the percentage of the variation in a portfolio's returns that is explained by variation in the market's returns?

GIPS requirements include: uniformity in certain performance calculations and disclosures;inclusion of all actual fee-paying discretionary portfolios in composites with similar objectives;compliant history for at least 5 years,or since inception if less than 5 years.

Total risk of a portfolio is measured by the beta coefficient.

GIPS was created to obtain global acceptance of a standard for fair presentation.

If we are to assess performance carefully,we must do so on what kind of basis?

Superior portfolio performance can result from:

Time-weighted,as opposed to money-weighted,return captures the rate of return actually earned by the fund manager.

The money-weighted rate of return is equivalent to the internal rate of return.

According to Jensen's differential return measure,what is alpha?

Which of the following is true regarding M2?It produces a measure of portfolio performance that:

Discuss how constraints on portfolio managers affect the portfolio results.

The Global Investment Performance Standards (GIPS®)were created by:

Which measure calculates performance relative to a benchmark portfolio?

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