Suppose Two Portfolios Have the Same Average Return and the Same

question 12

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 Treynor 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:

Groupthink

A psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Bay Of Pigs

A failed military invasion of Cuba in 1961 by Cuban exiles, sponsored by the U.S. government, aiming to overthrow Fidel Castro's government.

Groupthink

An occurrence in psychology where the pursuit of agreement or adherence within a group causes choices that are irrational or counterproductive.

Bad Decisions

Choices or judgments that lead to undesirable outcomes due to flawed reasoning or poor judgment.