Two Investment Advisors Are Comparing Performance

question 42

Multiple Choice

Two investment advisors are comparing performance. Advisor A averaged a 20% return with a portfolio beta of 1.5 and Advisor B averaged a 15% return with a portfolio beta of 1.2. If the T-bond rate was 5% and the market return during the period was 13%, which advisor was the better share picker?

• A)Advisor A was better because he generated a larger alpha
• B)Advisor B was better because he generated a larger alpha
• C)Advisor A was better because he generated a higher return
• D)Advisor B was better because he achieved a good return with a lower beta