Rodney holds a portfolio of risky assets that represents his entire risky investment. To evaluate the performance of Rodney's portfolio, in which order would you complete the steps listed?I) Compare the Sharpe measure of Rodney's portfolio to the Sharpe measure of the best portfolio.II) State your conclusions.III) Assume that past security performance is representative of expected performance.IV) Determine the benchmark portfolio that Rodney would have held if he had chosen a passive strategy.

A) I, III, IV, II
B) III, IV, I, II
C) IV, III, I, II
D) III, II, I, IV
E) III, I, IV, II

Question

Anthony Derby · Accepted Answer

Final Answer : B, Explanation :  III, IV, I, IIFirst, assuming past security performance is representative of expected performance (III) sets the foundation for evaluating the portfolio. Next, determining the benchmark portfolio (IV) that Rodney would have held if he had chosen a passive strategy provides a basis for comparison. Comparing the Sharpe measure of Rodney's portfolio to that of the best portfolio (I) then allows for assessing the risk-adjusted return. Finally, stating conclusions (II) summarizes the evaluation process.

Definitions

Learning Objectives

Learning Objectives

Related questions