Question 1

__________ developed a popular method for risk-adjusted performance evaluation of mutual funds.

Accepted Answer

A) Eugene Fama 
B) Michael Jensen 
C) William Sharpe 
D) Jack Treynor 
E) Michael Jensen, William Sharpe, and Jack Treynor 
A) Eugene Fama 
B) Michael Jensen 
C) William Sharpe 
D) Jack Treynor 
E) Michael Jensen, William Sharpe, and Jack Treynor

Question 2

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio:   The risk-free return during the sample period was 4%. Calculate Treynor's measure of performance for Monarch Stock Fund.

Accepted Answer

A) 10.40% 
B) 8.80% 
C) 44.00% 
D) 50.00% 
A) 10.40% 
B) 8.80% 
C) 44.00% 
D) 50.00%

Question 3

Risk-adjusted mutual fund performance measures have decreased in popularity because

Accepted Answer

A) in nearly efficient markets it is extremely difficult for portfolio managers to outperform the market. 
B) the measures usually result in negative performance results for the portfolio managers. 
C) the high rates of return earned by the mutual funds have made the measures useless. 
D) in nearly efficient markets it is extremely difficult for portfolio managers to outperform the market and the measures usually result in negative performance results for the portfolio managers. 
E) None of the options 
A) in nearly efficient markets it is extremely difficult for portfolio managers to outperform the market. 
B) the measures usually result in negative performance results for the portfolio managers. 
C) the high rates of return earned by the mutual funds have made the measures useless. 
D) in nearly efficient markets it is extremely difficult for portfolio managers to outperform the market and the measures usually result in negative performance results for the portfolio managers. 
E) None of the options

Question 4

The following data are available relating to the performance of Wildcat Fund and the market portfolio:   The risk-free return during the sample period was 7%. Calculate Jensen's measure of performance for Wildcat Fund.

Accepted Answer

A) 1.00% 
B) 8.80% 
C) 44.00% 
D) 50.00% 
A) 1.00% 
B) 8.80% 
C) 44.00% 
D) 50.00%

Question 5

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio:   The risk-free return during the sample period was 3%. Calculate the Jensen measure of performance evaluation for Sooner Stock Fund.

Accepted Answer

A) 2.6% 
B) 4.00% 
C) 8.67% 
D) 31.43% 
E) 37.14% 
A) 2.6% 
B) 4.00% 
C) 8.67% 
D) 31.43% 
E) 37.14%

Question 6

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes:   The return on a bogey portfolio was 10%, calculated as follows:   The total excess return on the Aggie managed portfolio was

Accepted Answer

A) 1%. 
B) 3%. 
C) 4%. 
D) 5%. 
A) 1%. 
B) 3%. 
C) 4%. 
D) 5%.

Question 7

To determine whether portfolio performance is statistically significant requires

Accepted Answer

A) a very long observation period due to the high variance of stock returns. 
B) a short observation period due to the high variance of stock returns. 
C) a very long observation period due to the low variance of stock returns. 
D) a short observation period due to the low variance of stock returns. 
E) a low variance of returns over any observation period. 
A) a very long observation period due to the high variance of stock returns. 
B) a short observation period due to the high variance of stock returns. 
C) a very long observation period due to the low variance of stock returns. 
D) a short observation period due to the low variance of stock returns. 
E) a low variance of returns over any observation period.

Question 8

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio:   The risk-free return during the sample period was 6%. What is the Sharpe measure of performance evaluation for Long Horn Stock Fund

Accepted Answer

A) 1.33% 
B) 4.00% 
C) 8.67% 
D) 31.43% 
E) 37.14% 
A) 1.33% 
B) 4.00% 
C) 8.67% 
D) 31.43% 
E) 37.14%

Question 9

The M2 measure was developed by

Accepted Answer

A) Merton and Miller. 
B) Miller and Miller. 
C) Modigliani and Miller. 
D) Modigliani and Modigliani. 
E) the M&M Mars Company. 
A) Merton and Miller. 
B) Miller and Miller. 
C) Modigliani and Miller. 
D) Modigliani and Modigliani. 
E) the M&M Mars Company.

Question 10

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio:   The risk-free return during the sample period was 4%. Calculate Jensen's measure of performance for Monarch Stock Fund.

Accepted Answer

A) 1.00% 
B) 2.80% 
C) 44.00% 
D) 50.00% 
A) 1.00% 
B) 2.80% 
C) 44.00% 
D) 50.00%

Question 11

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

Accepted Answer

A) 12%. 
B) 14%. 
C) 15%. 
D) 16%. 
A) 12%. 
B) 14%. 
C) 15%. 
D) 16%.

Question 12

The Jensen portfolio evaluation measure

Accepted Answer

A) is a measure of return per unit of risk, as measured by standard deviation. 
B) is an absolute measure of return over and above that predicted by the CAPM. 
C) is a measure of return per unit of risk, as measured by beta. 
D) is a measure of return per unit of risk, as measured by standard deviation and is an absolute measure of return over and above that predicted by the CAPM. 
E) is an absolute measure of return over and above that predicted by the CAPM and is a measure of return per unit of risk, as measured by beta. 
A) is a measure of return per unit of risk, as measured by standard deviation. 
B) is an absolute measure of return over and above that predicted by the CAPM. 
C) is a measure of return per unit of risk, as measured by beta. 
D) is a measure of return per unit of risk, as measured by standard deviation and is an absolute measure of return over and above that predicted by the CAPM. 
E) is an absolute measure of return over and above that predicted by the CAPM and is a measure of return per unit of risk, as measured by beta.

Question 13

Studies of style analysis have found that ________ of fund returns can be explained by asset allocation alone.

Accepted Answer

A) between 50% and 70% 
B) less than 10% 
C) between 40 and 50% 
D) between 75% and 90% 
E) over 90% 
A) between 50% and 70% 
B) less than 10% 
C) between 40 and 50% 
D) between 75% and 90% 
E) over 90%

Question 14

Suppose two portfolios have the same average return, the same standard deviation of returns, but Aggie Fund has a higher beta than Raider Fund.According to the Treynor measure, the performance of Aggie Fund

Accepted Answer

A) is better than the performance of Raider Fund. 
B) is the same as the performance of Raider Fund. 
C) is poorer than the performance of Raider Fund. 
D) cannot be measured as there are no data on the alpha of the portfolio. 
A) is better than the performance of Raider Fund. 
B) is the same as the performance of Raider Fund. 
C) is poorer than the performance of Raider Fund. 
D) cannot be measured as there are no data on the alpha of the portfolio.

Question 15

Define and discuss the Sharpe, Treynor, and Jensen measures of portfolio performance evaluation and the situations in which each measure is the most appropriate measure.

Accepted Answer

Sharpe's measure, (r_P - r_f)/s_P, is a relati

Question 16

The geometric average rate of return is based on

Accepted Answer

A) the market's volatility. 
B) the concept of expected return. 
C) the standard deviation of returns. 
D) the CAPM. 
E) the principle of compounding. 
A) the market's volatility. 
B) the concept of expected return. 
C) the standard deviation of returns. 
D) the CAPM. 
E) the principle of compounding.

Question 17

The dollar-weighted return on a portfolio is equivalent to

Accepted Answer

A) the time-weighted return. 
B) the geometric average return. 
C) the arithmetic average return. 
D) the portfolio's internal rate of return. 
E) None of the options 
A) the time-weighted return. 
B) the geometric average return. 
C) the arithmetic average return. 
D) the portfolio's internal rate of return. 
E) None of the options

Question 18

The M-squared measure considers

Accepted Answer

A) only the return when evaluating mutual funds. 
B) the risk-adjusted return when evaluating mutual funds. 
C) only the total risk when evaluating mutual funds. 
D) only the market risk when evaluating mutual funds. 
E) None of the options 
A) only the return when evaluating mutual funds. 
B) the risk-adjusted return when evaluating mutual funds. 
C) only the total risk when evaluating mutual funds. 
D) only the market risk when evaluating mutual funds. 
E) None of the options

Question 19

You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.The risk-free return during the sample period is 6%.The average returns, standard deviations, and betas for the three funds are given below, as are the data for the S&P 500 Index.   The fund with the highest Sharpe measure is

Accepted Answer

A) Fund A. 
B) Fund B. 
C) Fund C. 
D) Funds A and B (tied for highest). 
E) Funds A and C (tied for highest). 
A) Fund A. 
B) Fund B. 
C) Fund C. 
D) Funds A and B (tied for highest). 
E) Funds A and C (tied for highest).

Question 20

Discuss, in general, the performance attribution procedures.

Accepted Answer

The portfolio management decision proces

Exam 24: Portfolio Performance Evaluation

__________ developed a popular method for risk-adjusted performance evaluation of mutual funds.

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: The risk-free return during the sample period was 4%. Calculate Treynor's measure of performance for Monarch Stock Fund.

Risk-adjusted mutual fund performance measures have decreased in popularity because

The following data are available relating to the performance of Wildcat Fund and the market portfolio: The risk-free return during the sample period was 7%. Calculate Jensen's measure of performance for Wildcat Fund.

The following data are available relating to the performance of Sooner Stock Fund and the market portfolio: The risk-free return during the sample period was 3%. Calculate the Jensen measure of performance evaluation for Sooner Stock Fund.

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes: The return on a bogey portfolio was 10%, calculated as follows: The total excess return on the Aggie managed portfolio was

To determine whether portfolio performance is statistically significant requires

The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio: The risk-free return during the sample period was 6%. What is the Sharpe measure of performance evaluation for Long Horn Stock Fund

The M2 measure was developed by

The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: The risk-free return during the sample period was 4%. Calculate Jensen's measure of performance for Monarch Stock Fund.

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 Jensen portfolio evaluation measure

Studies of style analysis have found that ________ of fund returns can be explained by asset allocation alone.

Suppose two portfolios have the same average return, the same standard deviation of returns, but Aggie Fund has a higher beta than Raider Fund.According to the Treynor measure, the performance of Aggie Fund

Define and discuss the Sharpe, Treynor, and Jensen measures of portfolio performance evaluation and the situations in which each measure is the most appropriate measure.

The geometric average rate of return is based on

The dollar-weighted return on a portfolio is equivalent to

The M-squared measure considers

Discuss, in general, the performance attribution procedures.

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

The M² measure was developed by