Performance Measures

Question 1

Jensen’s alpha

Answer 1

Also known as Jensen’s Performance Index. Alpha measures the portfolio’s actual or realized return in excess of the expected return.

Question 2

Treynor Ratio

Answer 2

Uses Beta in it’s denominator and therefore may be used only to compare the performance of diversified portfolio of diversified portfolios or stocks that constitute diversified portfolios.

Question 3

Sharpe. Ratio

Answer 3

Uses standard deviation in its denominator and therefore is a catchall formula

Question 4

Sharpe Ratio

Answer 4

Uses standard deviation in its denominator and therefore is a catchall formula