Question
Two investment advisers are comparing performance. One averaged a 19% return and the other a 16% return. However, the beta of the first adviser was
Two investment advisers are comparing performance. One averaged a 19% return and the other a 16% return. However, the beta of the first adviser was 1.5, while that of the second was 1. a) Can you tell which adviser was a better selector of individual stocks (aside from the issue of general movements in the market)? What is the performance measure of individual stocks? b) If the T-bill rate were 6% and the market return during the period were 14%, which adviser would be the superior stock selector? c) What if the T-bill rate were 3% and the market return 15%
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