Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Her portfolio holds only stocks found in the S&P 500 and cash.

Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market-timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&Ps allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%.

One-year Trailing Returns

Miranda Fund S&P 500

Return 10.2% -22.5%

Standard deviation 37% 44%

Beta 1.10 1.00

a. What are the Sharpe ratios for the Miranda Fund and the S&P 500? b. What are the M ² measures for Miranda and the S&P 500? c. What is the Treynors measure for the Miranda Fund and the S&P 500? d. What is the Jensen measure for the Miranda Fund?