Finance Investments Chapter 13

A fund is considered to have good performance if its alpha is above _____.

0

R-square values will range from ______.

0 to 100

Jensen's alpha is based on the underlying framework of the _______.

CAPM

Which of the following provide investment firms with guidance for calculating and reporting their performance results to prospective and current clients?

GIPS

Suppose you are evaluating funds to determine which one should be included in your existing portfolio. In this case, the ______ ratio would be most appropriate to use in making your decision.

Treynor

The intercept of a regression of the excess return of an investment on the excess return of the market is called a fund's ________ .

alpha

True or false: Firms are required by law to comply with GIPS.

false

True or false: The Sharpe and Treynor ratios will provide the same rankings of mutual fund performance.

false

True or false: The Sharpe ratio is a measure of excess return.

false

Assuming two funds have the same alpha, an investor would prefer the fund that has the _______ R-squared.

higher

The portfolio that has the highest possible Sharpe ratio is referred to as the Sharpe- ___________ portfolio.

optimal

What is the assessment of how well a money manager achieves a balance between high returns and acceptable risks?

performance evaluation

______________ return states the total percentage return on an investment with no adjustment for risk or comparison to any benchmark.

raw

The information ratio will always have the (same/opposite) sign as the alpha.

same

The Treynor ratio focuses on what type of risk?

systematic

Which of the following is a method to achieve the most desirable balance of risk and return for an investment portfolio?

the Sharpe-optimal portfolio

The Sharpe ratio focuses on what type of risk?

total risk

A fund's information ratio is equal to the alpha divided by the _____, which is a measure of how volatile a portfolio is relative to its benchmark.

tracking error

True or false: It is possible for a fund to have a negative Sharpe or Treynor ratio and still be considered to have strong performance.

true

True or false: Value-at-risk is closely related to the normal distribution.

true

VaR stand for _________.

value-at-risk

Suppose we regress the excess returns of a fund against the excess returns of the market. The _______ of the estimated regression model would reflect the fund's alpha.

y-intercept