Consider the following historical performance data for two different portfolios, the Standard and Poor's 500, and the 90-day T-bill. Investment Average Rate of Standard Vehicle Return Deviation Beta R2 Fund 1 27.80% 22.30% 1.273 0.763 Fund 2 13.38 14.60 0.860 0.690 S&P 500 15.37 13.90 90-day T-bill 6.60 0.70 a. Calculate the Fama overall performance measure for both funds. Round your answers to two decimal places. Overall performance (Fund 1): % Overall performance (Fund 2): % b. What is the return to risk for both funds? Do not round intermediate calculations. Round your answers to two decimal places. Return to risk (Fund 1): % Return to risk (Fund 2): % c. For both funds, compute the measures of (1) selectivity, (2) diversification, and (3) net selectivity. Do not round intermediate calculations. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Selectivity Diversification Net selectivity Fund 1 % % % Fund 2 % % % d. Explain the meaning of the net selectivity measure and how it helps you evaluate investor performance. Which fund had the best performance? The net selectivity is an unexplained portion of the excess -Select- v performance is. -Select- v -Select- v diversification. The higher the net selectivity the -Select- v investor .... ..... | had the best performance.
Consider the following historical performance data for two different portfolios, the Standard and Poor's 500, and the 90-day T-bill. Investment Average Rate of Standard Vehicle Return Deviation Beta R2 Fund 1 27.80% 22.30% 1.273 0.763 Fund 2 13.38 14.60 0.860 0.690 S&P 500 15.37 13.90 90-day T-bill 6.60 0.70 a. Calculate the Fama overall performance measure for both funds. Round your answers to two decimal places. Overall performance (Fund 1): % Overall performance (Fund 2): % b. What is the return to risk for both funds? Do not round intermediate calculations. Round your answers to two decimal places. Return to risk (Fund 1): % Return to risk (Fund 2): % c. For both funds, compute the measures of (1) selectivity, (2) diversification, and (3) net selectivity. Do not round intermediate calculations. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Selectivity Diversification Net selectivity Fund 1 % % % Fund 2 % % % d. Explain the meaning of the net selectivity measure and how it helps you evaluate investor performance. Which fund had the best performance? The net selectivity is an unexplained portion of the excess -Select- v performance is. -Select- v -Select- v diversification. The higher the net selectivity the -Select- v investor .... ..... | had the best performance.
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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Transcribed Image Text:Consider the following historical performance data for two different portfolios, the Standard and Poor's 500, and the 90-day T-bill.
Investment Average Rate of
Standard
Vehicle
Return
Deviation
Beta
R2
Fund 1
27.80%
22.30%
1.273
0.763
Fund 2
13.38
14.60
0.860
0.690
S&P 500
15.37
13.90
90-day T-bill
6.60
0.70
a. Calculate the Fama overall performance measure for both funds. Round your answers to two decimal places.
Overall performance (Fund 1):
%
Overall performance (Fund 2):
%
b. What is the return to risk for both funds? Do not round intermediate calculations. Round your answers to two decimal places.
Return to risk (Fund 1):
%
Return to risk (Fund 2):
%
c. For both funds, compute the measures of (1) selectivity, (2) diversification, and (3) net selectivity. Do not round intermediate calculations. Round your answers to two decimal
places. Use a minus sign to enter negative values, if any.
Selectivity
Diversification
Net selectivity
Fund 1
%
%
Fund 2
%
%
d. Explain the meaning of the net selectivity measure and how it helps you evaluate investor performance. Which fund had the best performance?
The net selectivity is an unexplained portion of the excess -Select- v
performance is. -Select- v had the best performance.
-Select-
v diversification. The higher the net selectivity the -Select- v investor
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