Suppose two portfolios have the same average return and the same standard deviation of returns, but Buckeye Fund has a lower beta than Wild Cat Fund. According to the Treynor measure, the performance of Buckeye Fund
A) is better than the performance of Wild Cat Fund.
B) is the same as the performance of Wild Cat Fund.
C) is poorer than the performance of Wild Cat Fund.
D) cannot be measured as there are no data on the alpha of the portfolio.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The Treynor measure evaluates a portfolio's excess return per unit of risk, using beta as the risk measure. Since Buckeye Fund has a lower beta (indicating lower market risk) but the same average return as Wild Cat Fund, it has a higher Treynor measure, indicating better performance.

Suppose Two Portfolios Have the Same Average Return and the Same