You are comparing three securities and discover they all have identical Treynor ratios. Given this information, which one of the following must be true regarding these three securities?
A)They have identical betas.
B)They have the same rates of return.
C)They earn identical rewards per unit of total risk.
D)They earn identical rewards per unit of systematic risk.
E)They have identical Sharpe ratios also.

Question

Quizplus · Accepted Answer

The Treynor ratio measures the returns earned in excess of the risk-free rate per unit of market risk (systematic risk), as captured by the beta of the portfolio. If three securities have identical Treynor ratios, it means they earn identical rewards per unit of systematic risk, regardless of their total risk, individual rates of return, or Sharpe ratios.

You Are Comparing Three Securities and Discover They All Have