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Peter is considering three potential assets and has measured the performance of these using linear regressions. Energy High Tech Telecom Intercept -2.0180 0.6716 -0.2858 Slope
Peter is considering three potential assets and has measured the performance of these using linear regressions. Energy High Tech Telecom Intercept -2.0180 0.6716 -0.2858 Slope (rm-rf) 1.7335 1.0112 0.8221 Average ri-rf (%) 0.3517 2.0540 0.8380 SD of ri-rf (%) 9.9606 5.1036 4.5444 SD of residuals (%) 6.0862 2.2111 2.5826 R-squared 0.6266 0.8123 0.6770 Observations 60 60 60 Average rm-rf (%) 1.3670 SD of rm-rf (%) 4.5487 Average rf (%) 0.0885 a) What is the Jensen's alpha of each asset? [1 mark] b) What is the Sharpe and Treynor ratios of each asset? [3 marks] c) What is the information ratio of each asset? [3 marks] d) Explain under what situation(s) would it be most appropriate to use each of these metrics. [3 marks] Peter is considering three potential assets and has measured the performance of these using linear regressions. Energy High Tech Telecom Intercept -2.0180 0.6716 -0.2858 Slope (rm-rf) 1.7335 1.0112 0.8221 Average ri-rf (%) 0.3517 2.0540 0.8380 SD of ri-rf (%) 9.9606 5.1036 4.5444 SD of residuals (%) 6.0862 2.2111 2.5826 R-squared 0.6266 0.8123 0.6770 Observations 60 60 60 Average rm-rf (%) 1.3670 SD of rm-rf (%) 4.5487 Average rf (%) 0.0885 a) What is the Jensen's alpha of each asset? [1 mark] b) What is the Sharpe and Treynor ratios of each asset? [3 marks] c) What is the information ratio of each asset? [3 marks] d) Explain under what situation(s) would it be most appropriate to use each of these metrics. [3 marks]
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