The ranking differences between the Sharpe, Treynor, and Jensen performance measures occur because of the differences in diversification.

Question

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The Sharpe, Treynor, and Jensen performance measures differ in how they account for risk, with the Sharpe ratio considering total risk, the Treynor ratio focusing on systematic risk, and the Jensen's alpha evaluating the return of a portfolio over its expected return based on the CAPM, leading to differences in rankings due to their varying approaches to diversification and risk assessment.

The Ranking Differences Between the Sharpe, Treynor, and Jensen Performance