How the jensen measure of performance is calculated

Reference no: EM133491943

Question: The following table provides the average annual rate of return for portfolio A, the market portfolio, and the risk-free asset.

	Average rate of return	Standard deviation of return	Beta
Portfolio A	10%	18%	0.6
Market Portfolio	12%	13%	1
Risk-free asset	6%	n/a	n/a

Required:

Question 1: Calculate both the Treynor measure and the Sharpe measure for both Portfolio A and the market portfolio. Discuss and compare the performances of Portfolio A and the market portfolio.

Question 2: Based on the performance results of Portfolio A and the market portfolio calculated in part (a), explain the reason for the conflicting results in details when using the Treynor measure versus the Sharpe measure.

Question 3: Describe how the Jensen measure of performance is calculated. Under what condition should it give a similar set of portfolio performance ranking as the Treynor measure and the Sharpe measure?

Reference no: EM133491943

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