The following data are available relating to the performance of stocks A and the market portfolio. The risk-free rate over the period was 6%.

StockAMarket

Averagereturn19%12%

Beta1.51.0

Residual standard deviation, (e)3%0%

Standard deviation of returns35%15%

a. Calculate the following statistics for stock A:

i. Alpha

ii. Information ratio

iii. Sharpe ratio

iv. Treynor's measure

b. According to the data, stock B has Alpha=2%, information ratio=1, Sharpe measure=0.5, and Treynor measure=1. Which stock is the best choice under the following circumstances?

i. As a complete investment strategy.

ii. To be optimally combined with a market-index fund.

iii. For competing with other sub-portfolios