Which of the Following Is Not True About the Sharpe

question 62

Multiple Choice

Which of the following is not true about the Sharpe ratio?

• A) An estimate for the beta of the portfolio is not required.
• B) It penalizes a portfolio that is not diversified.
• C) It allows us to find the best portfolio on the efficient frontier.
• D) It is useful for measuring the performance of an individual asset.
• E) All of the above are true about the Sharpe ratio.

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Definitions:

Total Economic Profit

The sum of accounting profit and economic profit, which measures the total earnings of a company after accounting for both explicit and implicit costs.

Profitable Level

The point at which the revenue from sales exceeds the costs involved in production or procurement.

Market Price

Market Price is the current price at which a good or service can be bought or sold in a marketplace.

Short Run

This is a period during which at least one factor of production is fixed, typically used in economic analyses to describe immediate effects of changes.