题目
Assume that you are only concerned with systematic risk. Which of the following would be the best measure to use to rank order funds with different betas based on their risk-return relationship with the market portfolio?
选项
A.Treynor ratio
B.Sharpe ratio
C.Jensen’s alpha
D.Sortino ratio
答案
A
解析
Systematic risk of a portfolio is that risk which is inherent in the market and thus cannot be diversified away. In this situation you should seek a measure which ranks funds based on systematic risk only, which is reflected in the beta as defined below:「huixue_img/importSubject/1564170577546186752.png」where is the correlation coefficient between the portfolio and the market, represents the standard deviation of the portfolio and represents the standard deviation of the market. In a well-diversified portfolio (where one is normally only concerned with systematic risk), it can be assumed that the correlation coefficient is close to 1, therefore beta can be approximated to an even simpler equation:「huixue_img/importSubject/1564170577621684224.png」In either case, beta explains the volatility of the portfolio compared to the volatility of the market, which captures only systematic risk. The Treynor ratio is the correct ratio to use in this case. The formula is: which describes the difference between the expected return of the portfolio, E(Rp) and the risk free rate Rf divided by the portfolio beta β. Therefore, it plots excess return over systematic risk.