An asset with a Treynor ratio greater than the Treynor ratio of the market will have a:
A) positive Jensen's alpha.
B) negative Jensen's alpha.
C) Sharpe ratio greater than the Sharpe ratio of the market.
D) Sharpe ratio les than the Sharpe ratio of the market.
E) Insufficient information.

Question

Quizplus · Accepted Answer

A positive Treynor ratio indicates that the asset has earned a higher return than the expected return based on its level of systematic risk. Therefore, it is likely that the asset has generated positive risk-adjusted returns, resulting in a positive Jensen's alpha. Sharpe ratio is not related to Treynor ratio in this case.

An Asset with a Treynor Ratio Greater Than the Treynor