Question 1

What is performance attribution?

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Question 2

Explain the characteristic line in excess return form for the Jensen alpha measure.

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Question 3

Time-weighted as opposed to dollar-weighted return captures rate of return actually earned by the portfolio manager.

Accepted Answer

The time-weighted return calculates the compounded growth rate of the portfolio over a specific time period, while ignoring the impact of cash inflows and outflows. This method captures the rate of return actually earned by the portfolio manager, as it is independent of external factors such as timing and amount of cash flow. In contrast, the dollar-weighted return considers the impact of cash flows and reflects the actual return earned by the investor.

Question 4

GIPS requirements include: uniformity in certain performance calculations and disclosures; inclusion of all actual fee-paying discretionary portfolios in composites with similar objectives; compliant history for at least 5 years,or since inception if less than 5 years.

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The statement accurately reflects the requirements of GIPS.

Question 5

How is regression analysis used to measure portfolio diversification?

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Question 6

A retired couple's assets consist of a $100,000 house,a $400,000 securities portfolio,a $15,000 car,and personal effects.Would they be more concerned with the Sharpe performance measure or the Treynor performance measure for the portfolio?

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Question 7

The coefficient of determination is also known as R-squared,is used to denote the degree of diversification.

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The coefficient of determination, also known as R-squared, is used to denote the proportion of the variance in the dependent variable that is predictable from the independent variable. It is not used to denote the degree of diversification.

Question 8

What are the appropriate uses of the Sharpe and the Treynor performance measures?

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Question 9

What are some of the problems associated with using risk-adjusted portfolio performance measures?

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Question 10

Sharpe's RVAR measures the slope of the line between RF and the portfolio being evaluated.If the line is plotted between RF and a market index,where would superior portfolios lie? Inferior portfolios?

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Question 11

GIPS was created to obtain global acceptance of a standard for fair presentation.

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The Global Investment Performance Standards (GIPS) were developed to provide a globally accepted standard for fair presentation and disclosure of investment performance.

Question 12

What is the major difference between the Sharpe and Treynor models?

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Question 13

Consider the five funds shown below: ^*Significant at the 5 percent level a.Which fund's returns are best explained by the market's returns? b Which fund had the largest total risk? c.Which fund had the lowest market risk? The highest? d.Which fund(s),according to Jensen's alpha,outperformed the market?

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Question 14

Discuss how constraints on portfolio managers affect the portfolio results.

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Quiz 22: Evaluation of Investment