Suppose two portfolios have the same average return,the same standard deviation of returns,but portfolio A has a lower beta than portfolio B.According to the Treynor 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 is no data on the alpha of the portfolio
E)none of the above is true.

Question

Quizplus · Accepted Answer

The Treynor measure evaluates the excess return of a portfolio per unit of systematic risk, as measured by beta. A lower beta implies less systematic risk, and given that the two portfolios have the same average return and standard deviation of returns, portfolio A must have a higher risk-adjusted return, making it a better performer according to the Treynor measure.

Suppose Two Portfolios Have the Same Average Return,the Same Standard