The Modigliani M² Measure and the Treynor T² Measure

question 8

Multiple Choice

The Modigliani M² measure and the Treynor T² measure

• A) are identical.
• B) are nearly identical and will rank portfolios the same way.
• C) are nearly identical, but might rank portfolios differently.
• D) are somewhat different; M² can be used to rank portfolios, but T² cannot.
• E) are somewhat different; T² can be used to rank portfolios, but M² cannot.

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Definitions:

Exogenously

Originating from outside; determined by external factors not within the system.

Endogenously

Originating or produced from within a system, indicating a factor that is internal to an economic model or process.

Natural Rate

The unemployment rate at which the economy operates at full employment, where inflation is stable without accelerating.

Unemployment

A situation where individuals who are capable of working and are actively seeking a job are unable to find employment.