The measure of performance that divides the portfolio's risk premium by the portfolio's beta is the
A) Sharpe measure.
B) Jensen measure.
C) Fama measure.
D) Alternative components model (MCV).
E) Treynor measure.

Question

Quizplus · Accepted Answer

The measure that divides the portfolio's risk premium by the portfolio's beta is known as the Treynor measure. It is used to evaluate the performance of investment portfolios by taking into account both the risk and return of the portfolio. The higher the Treynor ratio, the better the risk-adjusted performance of the portfolio. Therefore, the best choice is E - Treynor measure.

The Measure of Performance That Divides the Portfolio's Risk Premium