The Treynor-Black model combines an actively managed portfolio with an efficiently diversified portfolio in order to _______________________.
I.improve the diversification of the overall portfolio
II.improve the overall portfolio's Sharpe ratio
III.reach a higher CAL than otherwise would be possible
A) I only
B) I and II only
C) II and III only
D) I, II and III

Question

Quizplus · Accepted Answer

The Treynor-Black model aims to combine an actively managed portfolio with an efficiently diversified portfolio to improve the overall portfolio's Sharpe ratio (II) and reach a higher CAL than otherwise would be possible (III). While improving the diversification of the overall portfolio is certainly a goal, it is not the primary objective of this particular model.

The Treynor-Black Model Combines an Actively Managed Portfolio with an Efficiently