Question
Consider the following historical performance data for two different portfolios, the Standard and Poors 500, and the 90-day T-bill. Investment Average Rate of Standard Vehicle
Consider the following historical performance data for two different portfolios, the Standard and Poors 500, and the 90-day T-bill.
Investment | Average Rate of | Standard | ||||
Vehicle | Return | Deviation | Beta | R2 | ||
Fund 1 | 28.40 | % | 22.25 | % | 1.275 | 0.740 |
Fund 2 | 13.08 | 14.80 | 0.874 | 0.742 | ||
S&P 500 | 15.88 | 13.90 | ||||
90-day T-bill | 5.40 | 0.60 |
A. Calculate the Fama overall performance measure for both funds. Round your answers to two decimal places.
Overall performance (Fund 1): %
Overall performance (Fund 2): %
B. What is the return to risk for both funds? Do not round intermediate calculations. Round your answers to two decimal places.
Return to risk (Fund 1): %
Return to risk (Fund 2): %
C. For both funds, compute the measures of (1) selectivity, (2) diversification, and (3) net selectivity. Do not round intermediate calculations. Round your answers to two decimal places. Use a minus sign to enter negative values, if any.
D. Explain the meaning of the net selectivity measure and how it helps you evaluate investor performance. Which fund had the best performance?
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