ADMS 4501 Lecture Notes - Treynor Ratio, Risk-Free Interest Rate, Sharpe Ratio

• School: York University
• Department: Administrative Studies
• Course: ADMS 4501
• Professor: all

Document Summary

Adms 4501 winter 2012 lois king. Lecture 11 chapter 18 evaluation of portfolio performance mar 22. Peer group comparisons: collects the returns produced by a representative universe of investors over a specific period of time, potential problems. Risk-adjusted performance measures: treynor portfolio performance measure. Builds on capital markets theory (include capm) Assumes a completely diversified portfolio leaving systematic risk as the relevant risk. Focuses on the portfolio"s undiversifiable risk: market or systematic risk: sharpe portfolio performance measure. Seeks to measure the total risk of a portfolio, not just the level of systematic risk. Shows the risk premium earned over the risk free rate per unit of standard deviation (or total risk). Sharpe ratios greater than the ratio for the market portfolio indicate superior performance. Linked to the cml: applying the jensen measure. Requires using a different rfr for each time interval during the sample period.