The Modigliani M 2 measure and the Treynor T 2 measureA) are identical.B) are nearly identical and will rank portfolios the same way.C) are nearly identical, but might rank portfolios differently.D) are somewhat different; M 2 can be used to rank portfolios, but T 2 cannot.E) are somewhat different; T 2 can be used to rank portfolios, but M 2 cannot.

Question

The Modigliani M 2  measure and the Treynor T 2  measureA)  are identical.B)  are nearly identical and will rank portfolios the same way.C)  are nearly identical, but might rank portfolios differently.D)  are somewhat different; M 2  can be used to rank portfolios, but T 2  cannot.E)  are somewhat different; T 2  can be used to rank portfolios, but M 2  cannot.

Suliman AL-SUMAIRI · Accepted Answer

Final Answer : C, Explanation :  The Modigliani measure and the Treynor measure are similar in that they both evaluate the risk-adjusted returns of portfolios. However, they use different risk metrics (Modigliani uses standard deviation, while Treynor uses beta), which can lead to different rankings of portfolios despite their similarities.

Definitions

Learning Objectives

Learning Objectives

Related questions