Question
Given the performance of 3 mutual funds and S&P500 over the past 15 years in table below: Return and Risk data for 5 equity mutual
Given the performance of 3 mutual funds and S&P500 over the past 15 years in table below:
Return and Risk data for 5 equity mutual funds, 15 year period |
Mutual Fund | Average Return % | Standard Deviation % | Beta | R 2 |
1 | 15.86 | 22.85 | 1.46 | .64 |
2 | 22.09 | 17.27 | 1.24 | .79 |
3 | 18.39 | 11.82 | 0.60 | .39 |
S&P 500 | 16.35 | 12.44 | 1.0 | 1.0 |
And assuming that expected market return for next year is 16.35 % and current and average of past 15 years risk free rate is 7.96 %, and using a market risk premium of 8.39% (16.35 -7.96) for the 15 year period, estimate: a. Sharpe ratios of all 3 funds and S&P 500. Which fund has the highest risk adjusted performance according to Sharpe measure? Which of the above funds have beaten the market? b. Treynor of all 3 funds and S&P 500. Which fund has the highest risk adjusted performance according to Treynor measure? Which of the above funds have beaten the market? c. Jensens alpha for fund 1 d. Which fund is exposed to most nonsystematic risk?
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