Suppose Two Portfolios Have the Same Average Return and the Same

question 40

Multiple Choice

Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher 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 are no data on the alpha of the portfolio.
• E) None of the options are correct.

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Definitions:

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