The RVOL ratio shows Portfolio A had a superior performance; whereas, the RVAR ratio shows it to have an inferior performance. This can be explained if Portfolio A has
A) large market and small unsystematic risk.
B) large market and large unique risk.
C) large systematic and no unique risk.
D) small systematic and large unique risk.

Question

Quizplus · Accepted Answer

The RVOL (Relative Volatility) ratio indicating superior performance suggests Portfolio A had higher returns for its level of risk, while the RVAR (Relative Value at Risk) ratio showing inferior performance implies a higher risk of extreme losses. This scenario is consistent with Portfolio A having small systematic (market) risk and large unique (unsystematic) risk, as unique risk can lead to higher extreme losses not captured by standard volatility measures.

The RVOL Ratio Shows Portfolio a Had a Superior Performance;