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Exam 18: Portfolio Performance Evaluation

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Question 41

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A mutual fund with a beta of 1.1 has outperformed the S&P500 over the last 20 years.We know that this mutual fund manager _______________________.

A) must have had superior stock selection ability
B) must have had superior asset allocation ability
C) must have had superior timing ability
D) may or may not have outperformed the S&P500 on a risk adjusted basis

E) A) and D)
F) A) and B)

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Question 42

Multiple Choice

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The average returns, standard deviations and betas for three funds are given below along with data for the S&P 500 index. The risk free return during the sample period is 6%. -You wish to evaluate the three mutual funds using the Treynor measure for performance evaluation.The fund with the highest Treynor measure of performance is __________.

A) Fund A
B) Fund B
C) Fund C
D) indeterminable

E) A) and B)
F) A) and C)

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Question 43

Multiple Choice

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A managed portfolio has a standard deviation equal to 22% and a beta of 0.9 when the market portfolio's standard deviation is 26%.The adjusted portfolio P* needed to calculate the M² measure will have ________ invested in the managed portfolio and the rest in T-bills.

__________ portfolio manager(s) experience streaks of abnormal returns which are hard to label as lucky outcomes,and ____ anomalies in realized returns have been sufficiently persistent such that portfolio managers could use them to beat a passive strategy over prolonged periods.

One hundred fund managers enter a contest to see how many times in thirteen years they can earn a higher return than their competitors.The probability distribution of the number of successful years out of thirteen for the best performing money managers is Out of this sample,chance alone would indicate that there is a ______ probability that someone would beat the market at least 11 times out of 13 years.

The risk free rate, average returns, standard deviations and betas for three funds and the S&P500 are given below. -Based on the M² measure,portfolio C has a superior return of _____ as compared to the S&P500.

Most professionally managed equity funds __________.

The Treynor-Black Model assumes security markets are _________.

Portfolio performance is often decomposed into various subcomponents such as the return due to ___________. I.broad asset allocation across security classes II.sector weightings within equity markets III.security selection with a given sector The one decision that contributes most to the fund performance is

In performance measurement the bogey portfolio is designed to _________.

In the Treynor-Black model,the active portfolio will contain stocks with __________.

Active portfolio managers try to construct a risky portfolio with _______.

The theory of efficient frontiers has __________.

Consider the theory of active portfolio management.Stocks A and B have the same beta and the same positive alpha.Stock A has higher nonsystematic risk than stock B. You should want __________ in your active portfolio.

Assume you purchased a rental property for $100,000 and sold it one year later for $115,000 (there was no mortgage on the property) .At the time of the sale,you paid $3,000 in commissions and $1,000 in taxes.If you received $10,000 in rental income (all received at the end of the year) ,what annual rate of return did you earn?

A portfolio generates an annual return of 16%,a beta of 1.2 and a standard deviation of 19%.The market index return is 12% and has a standard deviation of 16%.What is the Treynor measure of the portfolio if the risk free rate is 6%?

The comparison universe is __________.

The critical variable in the determination of the success of the active portfolio is the stock's __________.

A portfolio generates an annual return of 16%,a beta of 1.2 and a standard deviation of 19%.The market index return is 12% and has a standard deviation of 16%.What is the Sharpe measure of the portfolio if the risk free rate is 6%?

The risk free rate, average returns, standard deviations and betas for three funds and the S&P500 are given below. -Which one of the following is largely based on forecasts of macroeconomic factors?