Consider now a market where three funds can be traded, and you want to understand...
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Finance
Consider now a market where three funds can be traded, and you want to understand which is the best investment for you, based on all the performance measurement tools. Please calculate these ratios for three funds 1-Sharpe Ratio 2-Treynor Ratio 3-Information Ratio 4-Alpha Then answer the three questions. Note: The answers should include the numbers(the results of the ratios).
The numbers are:
Performance Measurement ReturnVolatilityBetaAlphaSharpeTreynorTracking ErrorInfo RatioFund 110.50%16.50%0.1 18.00% Fund 216.50%23.50%1.1 21.00% Fund 335.50%32.00%0.5 22.50% Index15.00%18.50% Risk-free1.25%
Write the solution and answer the following questions as well:
Which fund(s) outperform the benchmark (index)?
Which portfolio offers the highest compensation for risk?
Which fund has the most consistent performance over time?
Answer & Explanation
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