In an efficient market, which of the following performance measures should be zero for all assets?
I. Treynor ratio
II. Sharpe ratio
III. Jensen's alpha
A) III only
B) I and III only
C) II and III only
D) I only
E) I, II, and III

Question

Quizplus · Accepted Answer

In an efficient market, Jensen's alpha should be zero for all assets because it measures the abnormal return of an investment compared to the expected market return, assuming the market is efficient and all information is fully reflected in asset prices.

In an Efficient Market, Which of the Following Performance Measures