Suppose Two Portfolios Have the Same Average Return, the Same

question 65

Multiple Choice

Suppose two portfolios have the same average return, the same standard deviation of returns, but Aggie Fund has a higher beta than Raider Fund.According to the Sharpe measure, the performance of Aggie Fund

• A)is better than the performance of Raider Fund.
• B)is the same as the performance of Raider Fund.
• C)is poorer than the performance of Raider Fund.
• D)cannot be measured as there are no data on the alpha of the portfolio.

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Definitions:

One-sample Z-test

A statistical test used to determine whether there is a significant difference between the mean of a sample and a known or hypothesized population mean.

Mean of a Sample

The average value obtained by dividing the sum of all observations in a sample by the number of observations.

Mean of a Population

The average value derived from adding all the values in a population and then dividing by the number of values.

Null Hypothesis

A default hypothesis that there is no effect or no difference, used as a starting point for statistical significance testing.