If a mutual fund portfolio earned a return that exceeded the return on the S&P 500 stock index, you may conclude that the fund outperformed the market on a risk-adjusted basis.

Question

Quizplus · Accepted Answer

Exceeding the return of the S&P 500 does not automatically imply that the mutual fund outperformed on a risk-adjusted basis, as this comparison does not account for the level of risk taken by the mutual fund relative to the market index. Risk-adjusted returns consider both the return and the risk involved, often measured by metrics such as the Sharpe ratio.

If a Mutual Fund Portfolio Earned a Return That Exceeded