Consider the following annual returns produced by a MiniFund, a mutual fund investing in small stocks:

Referring to Table 1.1, use the Treasury bill returns as the riskfree return and the common stock returns as the market return, and calculate the following risk-adjusted return measures for the small stock mutual fund:
a. Ex post alpha
b. Reward-to-volatility ratio
c. Sharpe ratio
Comment on the mutual fund's risk-adjusted performance. What problems are associated with using a large capitalization index such as the S&P 500 (the source of the common stock returns) as the benchmark in evaluating this small company mutual fund?

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1971 16.50% 1972 4.43 1973-30.90 1974 -19.95 1975 52.82 1976 57.38% 1977 25.38 1978 23.46 1979 43.46 1980 39.88 1981 13.88% 1982 28.01 1983 39.67 1984 6.67 1985 24.66 1986 6.85% 1987-9.30 1988 22.87 1989 10.18 1990-21.56