1、 2. The comparison universe is _. A） a concept found only in astronomy B） the set of all mutual funds in the world C） the set of all mutual funds in the U. S. D） a set of mutual funds with similar risk characteristics to your mutual fund E） none of the above Easy A mutual fund manager is evaluated a
2、gainst the performance of managers of funds of similar risk characteristics. 3. _ did not develop a popular method for risk-adjusted performance evaluation of mutual funds. A） Eugene Fama B） Michael Jensen C） William Sharpe D） Jack Treynor E） A and B A Difficulty: Michael Jensen, William Sharpe, and
3、 Jack Treynor developed popular models for mutual fund performance evaluation. 4. Henriksson （1984） found that, on average, betas of funds _ during market advances A） increased very significantly B） increased slightly C） decreased slightly D） decreased very significantly E） did not change C Difficul
4、ty: Portfolio betas should have a large value if the market is expected to perform well and a small value if the market is not expected to perform well; thus, these results reflect the poor timing ability of mutual fund managers. 5. Most professionally managed equity funds generally _. A） outperform
5、 the S&P 500 index on both raw and risk-adjusted return measures B） underperform the S& C） outperform the S&P 500 index on raw return measures and underperform the S&P 500 index on risk-adjusted return measures D） underperform the S&P 500 index on raw return measures and outperform the S& E） match t
6、he performance of the S& B Difficulty: Most mutual funds do not consistently, over time, outperform the S&P 500 index on the basis of either raw or risk-adjusted return measures. 6. Suppose two portfolios have the same average return, the same standard deviation of returns, but portfolio A has a hig
7、her beta than portfolio B. According to the Sharpe measure, the performance of portfolio A _. A） is better than the performance of portfolio B B） is the same as the performance of portfolio B C） is poorer than the performance of portfolio B D） cannot be measured as there is no data on the alpha of t
8、he portfolio E） none of the above is true. The Sharpe index is a measure of average portfolio returns （in excess of the risk free return） per unit of total risk （as measured by standard deviation）. 7. Consider the Sharpe and Treynor performance measures. When a pension fund is large and has many man
9、agers, the _ measure is better for evaluating individual managers while the _ measure is better for evaluating the manager of a small fund with only one manager responsible for all investments. A） Sharpe, Sharpe B） Sharpe, Treynor C） Treynor, Sharpe D） Treynor, Treynor E） Both measures are equally g
10、ood in both cases. The Treynor measure is the superior measure if the portfolio is a small portion of many portfolios combined into a large investment fund. The Sharpe measure is superior if the portfolio represents the investors total risky investment position. 8. Suppose you purchase 100 shares of
11、 GM stock at the beginning of year 1, and purchase another 100 shares at the end of year 1. You sell all 200 shares at the end of year 2. Assume that the price of GM stock is $50 at the beginning of year 1, $55 at the end of year 1, and $65 at the end of year 2. Assume no dividends were paid on GM s
12、tock. Your dollar-weighted return on the stock will be _; your time-weighted return on the stock. A） higher than B） the same as C） less than D） exactly proportional to E） more information is necessary to answer this question In the dollar-weighted return, the stocks performance in the second year, w
13、hen 200 shares are held, has a greater influence on the overall dollar-weighted return. The time-weighted return ignores the number of shares held. 9. Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2, the alpha is 1%, and the average return is 14%. Based on Jensens measure
14、of portfolio performance, you would calculate the return on the market portfolio as A） 11.5% B） 14% C） 15% D） 16% Difficult 1% = 14% - 4% + 1.2（x - 4%）; x = 11.5%. 10. Suppose the risk-free return is 3%. The beta of a managed portfolio is 1.75, the alpha is 0%, and the average return is 16%. Based o
15、n Jensen A） 12.3% B） 10.4% C） 15.1% D） 16.7% 0% = 16% - 3% + 1.75（x - 3%）; x = 10.4%. 11. Suppose the risk-free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%, and the average return is 18%. Based on Jensen A） 12% 3% = 18% - 6% + 1.5（x - 6%）; x = 12%. 12. Suppose a particular
16、investment earns an arithmetic return of 10% in year 1, 20% in year 2 and 30% in year 3. The geometric average return for the year period will be _. A） greater than the arithmetic average return B） equal to the arithmetic average return C） less than the arithmetic average return D） equal to the mark
17、et return E） cannot tell from the information given The geometric mean will always be less than the arithmetic mean unless the returns in all periods are equal （in which case the two means will be equal）. 13. Suppose you buy 100 shares of Abolishing Dividend Corporation at the beginning of year 1 fo
18、r $80. Abolishing Dividend Corporation pays no dividends. The stock price at the end of year 1 is $100, the price $120 at the end of year 2, and the price is $150 at the end of year 3. The stock price declines to $100 at the end of year 4, and you sell your 100 shares. For the four years, your geome
19、tric average return is A） 0.0% B） 1.0% C） 5.7% D） 9.2% E） 34.5% （1.25）（1.20）（1.25）（0.6667）1/4 - 1.0 = 5.7% 14. You want to evaluate three mutual funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the ma
20、rket portfolio is 19%. The average returns, residual standard deviations, and betas for the three funds are given below. The fund with the highest information ratio measure is _. A） Fund A B） Fund B C） Fund C D） Funds A and B are tied for highest E） Funds A and C are tied for highest Information rat
21、io = P/（eP）; A: P = 20 - 6 - .8（19 - 6） = 3.6; 3.6/4 = 0.9; B: P = 21 - 6 - 1（19 - 6） = 2.0; 2/1.25 = 1.6; C: P = 23 - 6 - 1.2（19 - 6） = 1.4; 1.4/1.20 = 1.16. 15. You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample perio
22、d is 6%. The average returns, standard deviations and betas for the three funds are given below, as is the data for the S&P 500 index. The fund with the highest Sharpe measure is _. （24% - 6%）/30% = 0.60; （12% - 6%）/10% = 0.60; （22% - 6%）/20% = 0.80; S&P 500: （18% - 6%）/16% = 0.75. 16. You want to e
23、valuate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 4%. The average returns, standard deviations and betas for the three funds are given below, as is the data for the S& （18% - 4%）/38% = 0.368; （15% - 4%）/27% = 0.407; （11%
24、- 4%）/24% = 0.292; （10% - 4%）/22% = 0.273. 17. You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 5%. The average returns, standard deviations and betas for the three funds are given below, as is the data for the S& The investment with the highest Sharpe measure is _. D） the index （23% - 5%）/30% = 0.60; （20% - 5%）/19% = 0.789; （19% - 5%）/17% = 0.824; （18% - 5%）/15% = 0.867. 18.
