One property of a risky portfolio that combines an active portfolio of mispriced securities with a market portfolio is that,when optimized,its squared Sharpe measure increases by the square of the active portfolio's
A)Sharpe ratio.
B)information ratio.
C)alpha.
D)Treynor measure.
E)none of the above.

Question

Quizplus · Accepted Answer

The squared Sharpe measure of the optimized risky portfolio increases by the square of the active portfolio's information ratio, which measures the active portfolio's ability to generate excess returns relative to a benchmark.

One Property of a Risky Portfolio That Combines an Active