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Exam 25: Evaluation of Portfolio Performance

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Question 41

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A portfolio's gross selectivity is made up of

A) Manager's risk.
B) Net selectivity.
C) Diversification.
D) a and b.
E) b and c.

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Question 42

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A negative Treynor measure (negative T)for a portfolio always indicates that the portfolio would plot below the SML.

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Question 43

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Exhibit 25.7 Use the Information Below for the Following Problem(S) Given the following information evaluate the performance of Tyler Incorporated (TI) . $R _ { \text {TI } } = 0.18 \quad B _ { T I } = 1.06 \quad R _ { Y } = 0.06 \quad R = 0.11$ -Refer to Exhibit 25.7.Calculate TI's overall performance.

Exhibit 25.3 Use the Information Below for the Following Problem(S) Consider the data presented below on three mutual funds and the market. $\begin{array} { l l c c c } \text { Fund } & \text { Beta } & \text { Devintion (\%) } & \text { Return (\%) } & \text { R } _ { ( } ( \% ) \\\hline \text { AAA } & 0.75 & 7.0 & 14 & 3 \\\text { BBB } & 1.05 & 5.0 & 18 & 3 \\\text { CCC } & 0.89 & 8.0 & 20 & 3 \\\text { Market } & 1.00 & 8.0 & 12 & 3\end{array}$ -Refer to Exhibit 25.3.Compute the Treynor Measure for the CCC fund.

Exhibit 25.9 Use the Information Below for the Following Problem(S) Consider the following information for four portfolios, the market and the risk free rate (RFR) : $\begin{array} { l l l l } \text { Partidio } & \text { Return } & \text { Eet. } & \text { ED } \\\hline \text { A1 } & 0.15 & 1.25 & 0.182 \\\text { A2 } & 0.1 & 0.9 & 0.223 \\\text { A3 } & 0.12 & 1.1 & 0.138 \\\text { A4 } & 0.08 & 0.8 & 0.125 \\\text { Market } & 0.11 & 1 & 0.2 \\\text { RFR } & 0.03 & 0 & 0\end{array}$ -Refer to Exhibit 25.9.Calculate the Treynor Measure for each portfolio.

When applying the Jensen's alpha measure the alpha level and significance can vary greatly depending on the specification of the return-generating model.

Exhibit 25.7 Use the Information Below for the Following Problem(S) Given the following information evaluate the performance of Tyler Incorporated (TI) . $R _ { \text {TI } } = 0.18 \quad B _ { T I } = 1.06 \quad R _ { Y } = 0.06 \quad R = 0.11$ -Refer to Exhibit 25.7.Calculate TI's selectivity.

Exhibit 25.4 Use the Information Below for the Following Problem(S) The data presented below has been collected at this point in time. $\begin{array} { l l c c c } \text { Fund } & \text { Beta } & \text { Deviation(4) } & \text { Return(4) } & \text { Re (46) } \\\hline \text { AAA } & 1.05 & 4.98 & 16 & 6 \\\mathrm { BBB } & 1.00 & 4.04 & 15 & 6 \\\text { CCC } & 0.92 & 3.13 & 11 & 6 \\\text { Market } & 1.00 & 375 & 13 & 6\end{array}$ -Refer to Exhibit 25.4.Compute the Jensen Measure for the BBB fund.

Exhibit 25.11 Use the Information Below for the Following Problem(S) The last year's performance for four mutual funds is presented below. The market return was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return was 5%. $\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\quad\text { Standard }\\\begin{array}{cccc}\text { Fund } & \text { Beta } & \text { Deviation }(\%) & \text { Retwun }(\%) \\\hline \mathrm{A} & 1.50 & 18.95 & 12.5 \\\mathrm{~B} & 1.20 & 12.41 & 13.0 \\\text { C } & 0.90 & 9.30 & 11.2 \\\mathrm{D} & 050 & 810 & 95\end{array}\end{array}$ -Refer to Exhibit 25.11.Based on the Sharpe Measure which portfolio preformed best?

Which of the following performance measures is the most rigorous risk-adjustment process separating systematic and unsystematic risk?

Exhibit 25.5 Use the Information Below for the Following Problem(S) The data presented below has been collected at this point in time. $\begin{array} { l c c c c } \text { Fund } & \text { Beta } & \text { Devintion (\%) } & \text { Return (\%) } & \text { R } _ { ( } ( \% ) \\\hline \text { XOX } & 1.07 & 5.13 & 19 & 6 \\\text { YYY } & 1.02 & 4.28 & 17 & 6 \\\text { ZZZ } & 0.86 & 3.52 & 12 & 6\end{array}$ -What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8% and the return was 14%?

In the evaluation of bond portfolio performance,the analysis effect refers to

Exhibit 25.7 Use the Information Below for the Following Problem(S) Given the following information evaluate the performance of Tyler Incorporated (TI) . $R _ { \text {TI } } = 0.18 \quad B _ { T I } = 1.06 \quad R _ { Y } = 0.06 \quad R = 0.11$ -Refer to Exhibit 25.7.Calculate TI's risk.

Which measure of portfolio performance allows analysts to determine the statistical significance of abnormal returns?

The Sharpe measure of portfolio performance divides the portfolio's risk premium by the portfolio's beta.

Wagner and Tito suggested that a bond portfolio return differing from the return from the Lehman Brothers Index can be divided into four components.Which of the following is not included?

The policy effect is a difference in bond portfolio performance from that of a benchmark index due to a difference in duration.

Which of the following statements about returns-based analysis or effective mix analysis is true?

In the Characteristic Selectivity (CS) performance measure,

Sharpe's performance measure divides the portfolio's risk premium by the