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When Portfolio Performance Is Measured,what Type of Benchmark May Be

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Essay

When portfolio performance is measured,what type of benchmark may be used? Explain what Roll meant by benchmark error.Draw a graph that shows how market proxies might produce betas that have no relation to expected returns.Briefly discuss the graph.


Definitions:

James-Lange Theory

The James-Lange theory proposes that emotions result from the perception of bodily reactions to stimuli, rather than directly from the stimuli.

Cannon-Bard Theory

The psychological theory proposing that emotions and physiological reactions occur simultaneously, rather than one causing the other.

Cognitive Appraise

Cognitive Appraise is a process of evaluating and processing information and experiences in relation to one's own emotional and psychological state.

Primacy Of Thinking

The principle that thought processes precede and are fundamental to emotions, behaviors, and attitudes.

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