The measure of performance which 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 described in the question is the Treynor measure, which is calculated as the portfolio's excess return divided by its beta. Therefore, choice E is the correct answer. The Sharpe measure uses standard deviation instead of beta, the Jensen measure is based on the portfolio's alpha, and the Fama measure and alternative components model (MCV) are not commonly used measures of portfolio performance.

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