Ideally, clients would like to invest with the portfolio manager who has
A)a moderate personal risk-aversion coefficient.
B)a low personal risk-aversion coefficient.
C)the highest Sharpe measure.
D)the highest record of realized returns.

Question

Quizplus · Accepted Answer

Clients would ideally want to invest with a portfolio manager who can provide the highest risk-adjusted returns. The Sharpe measure is a ratio that measures the excess return per unit of risk, and a higher Sharpe measure indicates better risk-adjusted returns. Therefore, option C, which suggests choosing the portfolio manager with the highest Sharpe measure, is the best choice. The coefficient of personal risk-aversion is a personal attribute and not necessarily an indicator of the portfolio manager's ability to deliver strong returns. The realized returns are important, but they should be evaluated in the context of the risk taken to achieve them, which is captured by the Sharpe measure.

Ideally, Clients Would Like to Invest with the Portfolio Manager