FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 24: Portfolio Performance Evaluation

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

To determine whether portfolio performance is statistically significant requires

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.

F) A) and B)
G) C) and D)

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

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.

A) I, III, IV, II
B) III, IV, I, II
C) IV, III, I, II
D) III, II, I, IV
E) III, I, IV, II

F) D) and E)
G) A) and B)

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

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

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. $\begin{array}{cc} &\text {Average ReturnResidual } &\text { Standard Deviation }&\text { Beta }\\ \text { Fund A } &17.6\%&10\%&1.2\\ \text {Fund B } &17.5\%&20\%&1.0\\ \text { Fund C} &17.4\%&30\%&0.8\\\end{array}$ The fund with the highest Jensen measure is

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

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

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

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

The M² measure was developed by

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

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

The dollar-weighted return on a portfolio is equivalent to

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 M-squared measure considers

The following data are available relating to the performance of Seminole Fund and the market portfolio: $\begin{array}{lcc} & \text {Seminole } & \text { Market } \\ &&\text { Portfolio }\\\text { Average return } & 18 \% & 14\% \\\text { Standard deviations of returns } & 30\% & 22\% \\\text { Beta } & 1.4 & 1.0 \\\text { Residual standard deviation } &4.0 \% & 0.0 \%\end{array}$ 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?

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

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

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 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