class 6:

Question 1

treynor ratio

Answer 1

(Rp - RF) / Beta p

lso known as the reward-to-volatility ratio, is a performance metric for determining how much excess return was generated for each unit of risk taken on by a portfolio

Question 2

M^2 measure

Answer 2

creates a hypothetical complete portfolio that is composed of T-bills and the managed portfolio that has the same standard deviation as the market index

manager creates portfolios the same standard deviation as market or less, and they get as bonus the alpha return of our return to market

Question 3

information return

Answer 3

IR = RA / standard deviation of RA

the super return above the market divided by the risk we took

the higher the better

Question 4

encroachment

Answer 4

moving money from a certain style of stock (large cap mid cap small cap) to another

not wanted by clients

Question 5

style analysis

Answer 5

1. regress returns on indices representing a range of Asset classes

regression coefficient on each index would measure your fund’s

Question 6

attribution****

Answer 6

read textbook apparently

1. asset allocation
2. security selection

–> who deserves the gold and who deserves silver

you look at the differences in returns and weights caused by asset allocation and security selection

Question 7

factors affecting risk of investing internationally

Answer 7

GDP

currency

political

liquidity

technology

Question 8

ADR American repository receipt

Answer 8

a way to invest internationally

buying indirectly company’s abroad

perfect surrogate for something not listed in the stock exchange