4. You have just gathered the following performance data for three different money man-agers, based on a regression of their excess returns relative to those for the S&P 500 In-dex. Each manager's performance was measured over the same three-year period, but thereturn period for each was different.Manager Alpha0.058%0.1150.250ABCBeta0.951.120.78Std. Error of Regression Return Period0.533%5.8842.165WeeklyBiweeklyMonthlya. Calculate the information ratio for each manager, ignoring the difference in return re-porting periods.b. Calculate the annualized information ratio for each manager.c. Rank the managers' performance according to your answers in Parts a and b. Whichmanager performed the best? Explain.

The information ratio represents a measurement of portfolio returns exceeding the benchmark returns.…

4. You have just gathered the following performance data for three different money man- agers, based on a regression of their excess returns relative to those for the S&P 500 In- dex. Each manager's performance was measured over the same three-year period, but the return period for each was different. Manager Alpha 0.058% 0.115 0.250 A B с Beta Std. Error of Regression Return Period 0.95 0.533% 1.12 5.884 0.78 2.165 Weekly Biweekly Monthly a. Calculate the information ratio for each manager, ignoring the difference in return re- porting periods. b. Calculate the annualized information ratio for each manager. c. Rank the managers' performance according to your answers in Parts a and b. Which manager performed the best? Explain.

4. You have just gathered the following performance data for three different money man- agers, based on a regression of their excess returns relative to those for the S&P 500 In- dex. Each manager's performance was measured over the same three-year period, but the return period for each was different. Manager Alpha 0.058% 0.115 0.250 A B с Beta Std. Error of Regression Return Period 0.95 0.533% 1.12 5.884 0.78 2.165 Weekly Biweekly Monthly a. Calculate the information ratio for each manager, ignoring the difference in return re- porting periods. b. Calculate the annualized information ratio for each manager. c. Rank the managers' performance according to your answers in Parts a and b. Which manager performed the best? Explain.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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5. You are evaluating the performance of two portfolio managers, and you have gathered annual return data for the past decade: Manager X Return (%) Manager Y Return (%) Year -6.5 -1.5 -1.5 -3.5 -1.5 3 -1.5 4 -1.0 3.5 0.0 4.5 4.5 6.5 6.5 7.5 8.5 8.5 13.5 12.5 10 17.5 13.5 a. For each manager, calculate (1) the average annual return, (2) the standard deviation of returns, and (3) the semi-deviation of returns. b. Assuming that the average annual risk-free rate during the 10-year sample period was 1.5 percent, calculate the Sharpe ratio for each portfolio. Based on these computations, which manager appears to have performed the best? c. Calculate the Sortino ratio for each portfolio, using the average risk-free rate as the minimum acceptable return threshold. Based on these computations, which manager appears to have performed the best? d. When would you expect the Sharpe and Sortino measures to provide (1) the same per- formance ranking or (2) different performance rankings? Explain.
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uppose the average return on Asset A is 7.1 percent and the standard deviation is 8.3 percent, and the average return and standard deviation on Asset B are 4.2 percent and 3.6 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. a. What is the probability that in any given year, the return on Asset A will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.38 percent. How likely is it that such a low return will recur at some point in the future? (Do not round…
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Expected Return, Variance, Std. Deviation and Cofficient of Variation:Magee Inc.'s manager believes that economic conditions during the next year will be strong, normal, or weak, and she thinks that the firm's returns will have the probability distribution shown below. What's the standard deviation of the estimated returns?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. State of the Economy Probability of State Occurring Stock's Expected Return Boom 30% 22.95% Normal 50% 12.90% Recession 20% –8.60%
Expected Return, Variance, Std. Deviation and Cofficient of Variation:Magee Inc.'s manager believes that economic conditions during the next year will be strong, normal, or weak, and she thinks that the firm's returns will have the probability distribution shown below. What's the standard deviation of the estimated returns?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. State of the Economy Probability of State Occurring Stock's Expected Return Boom 30% 21.60% Normal 55% 13.50% Recession 15% –11.35% A. 11.04% B. 12.10% C. 9.47% D. 10.52% E. 9.99%

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