Best measure of performance of that portfolio

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Reference no: EM131851663

1. You invest in a portfolio and always reinvest any dividends and interest earned. Which of the following provides the best measure of the performance of that portfolio:

dollar-weighted return

geometric average return

arithmetic return

index return

Why does it provide the best measure?

2. Using data in the text, rank the following asset classes from lowest to highest average annual return over the period 1926 to 2013:

Small stocks

Long-term bonds

Large stocks

T-Bills

Why would you expect the relative returns to be ordered in this way? How would you expect these assets to be ranked by a standard risk measure?

Reference no: EM131851663

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