Which of the Following Statements About Jensen's Measure Are Correct

question 63

Multiple Choice

Which of the following statements about Jensen's measure are correct?
I. Through its use of the capital asset pricing model, Jensen's measure automatically adjusts for market return.
II. In general, the higher the Jensen's measure, the better a portfolio has performed.
III. Jensen's measure is referred to as alpha.
IV. A positive Jensen's measure indicates an investment has underperformed the market on a risk-adjusted basis.

• A) I and IV only
• B) I, II and III only
• C) II and III only
• D) I, III and IV only

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Definitions:

Forward Rate

An interest rate or exchange rate agreed upon today for a transaction that will occur at a future date.

Hong Kong Dollars

The official currency of Hong Kong, abbreviated as HKD.

Canadian Security

A financial instrument issued in Canada, such as stocks, bonds, or other investment vehicles, regulated by Canadian laws.

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to determine their relative purchasing power.