Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Sharpe measure, the performance of portfolio A
A) is better than the performance of portfolio B.
B) is the same as the performance of portfolio B.
C) is poorer than the performance of portfolio B.
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 Sharpe Index is a measure of average portfolio returns (in excess of the risk-free return) per unit of total risk (as measured by standard deviation).

Suppose Two Portfolios Have the Same Average Return and the Same