Page 35 - FINAL CFA SLIDES DECEMBER 2018 DAY 12
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Session Unit 12:
       LOS 42.i: Calculate and interpret the Sharpe ratio,
                          2
       Treynor ratio, M , and Jensen’s alpha., p.165                                        42. Portfolio Risk and Return: Part II
        Investment decision-making is about risk and return; so, we need different ways of measuring this:




                                                                            Produces the same portfolio rankings as the Sharpe ratio but
                                                                            is stated in % terms.









                                                         tanties













        Treynor measure and Jensen’s alpha:  Similar to
                                  2
        the Sharpe ratio and M :
        •   Treynor measure is based on slope and
        •   Jensen’s alpha =  % returns in excess of those from
            a portfolio with same beta and on same SML.
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