Question

15. Estimate the Sharpe, Treynor and Alpha Jensen's performance analyses fort the three portfolios below. Use the data below to complete the table. Portfolio Sharpe Treynor Jensen's Return 0.07 0.085 0.11 SD 0.15 0.12 0.095 Beta 0.8 1.05 1.4 Z 0.075 Market Risk Free 0.075 0.025 a. If you were to choose one portfolio, which one would it be? Why?

Answer 1

part olio Retwin R] 3p(0) Beta[B 0.07 0.15 0.8 x < 6.08505 0.12 pc..05 zino Ollo 190.095 N 4 market 0.075 0.075 1 Risk free rate 0.025 0 30 Sharpe ratio to t ools formula = Rm-R] where C ol Rm = retion from market OPG Partfolio sharpe ratio => 0.075 -0.07 –) 0.033333 00:15 => 0.075 -0.086 so 10.12 = -0.083333 => 0.075 -0.11 => -0.36 8421 0.095

Treyror ratio o o formula & Rm-R Co corona Pop portfolio Trennan raho => 0.075-004 -> 0.00625 Öffe 0 :8. Life =) 0.075-0.085 ).0 1.05 ) -0.009524 c o - 0.075-0.11 . 1.4 -> -0.025 Jensen's alpha [0] formula de Ppf - RR CAPM. a Rpp - [Rf + Ppp [Rm-RF)} where = P Rp = Tetra risk free rate of

Portfolio Tengen's act -> 0.07 – (0-025 +0.8(0,075-0-025) -) 0.07 -0.065 -) 0.005 -) 0.0845 - (0.025 +1.05 (0.075-0.025]] =) 0.085-00775 -0.0075) Z =) 0.11 - (0.025+1,4 (0.075-0.025]] =) 0.11-0.095 => 0.015 conclusion Generally the above 3 techniques [ sharpe, treynon, Jensen's] are used to measure the performance of poortfolio's. Accouching shampe's patio we would choose portfolio "x" because portfolio "x" has higher shore Datio when compared to othery

of treynd ratio , According to treynon's ratio we would choose portfolio "x" because portfolio ex has higher treynos's sako According to Jensen's alpha "a" we would choose post plio " ž because portfolio ₃ hes pemfoomed better fire highest alpha oc] when compared to others.