Measures of Investment Returns

Question 1

The holding period return is not often used as a measure of performance because it ignores the _________________ and does not address the time over which the investment has grown

Answer 1

time value of money

Question 2

The reason the arithmetic and geometric means differ is that the arithmetic mean does not consider the __________ effect of returns

Answer 2

compounding

Question 3

The geometric mean will always be ______ than the arithmetic mean, except when the returns for each period are equal, in which case the geometric and arithmetic means will be equal

Answer 3

Less

Question 4

_____________ is calculated by dividing the actual return by the beta of the investment

Answer 4

Risk adjusted return