Roadmap Investments

Question 1

Roadmap decision tree:

Performance measures

Answer 1

1. Measured in terms of beta or std deviation?
2. Contains systematic risk (diversified) or contains both systematic and unsystematic risk (not diversified)?
3. Measuring volatility or variability?

Is R^2
- higher 60 / diversified?
= look for highest alpha or treynor if no alpha

• lower than 60 / non-diversified?
  = look for highest Sharpe number