The Modigliani M² measure and the Treynor T² measure A) are identical. B) are nearly identical and will rank portfolios the same way. C) are nearly identical, but might rank portfolios differently. D) are somewhat different; M² can be used to rank portfolios, but T² cannot. E) are somewhat different; T² can be used to rank portfolios, but M² cannot.

Question

Quizplus · Accepted Answer

The Modigliani measure and the Treynor measure are similar in that they both evaluate the risk-adjusted returns of portfolios. However, they use different risk metrics (Modigliani uses standard deviation, while Treynor uses beta), which can lead to different rankings of portfolios despite their similarities.

The Modigliani M2 Measure and the Treynor T2 Measure

The Modigliani M² Measure and the Treynor T² Measure