Use the returns in the tab of the Chapter 13 Excel Outboxes.xls spread-

sheet to compute the following measures for each of the three portfolios: mean, standard deviation, beta, shortfall probability, expected shortfall, lower partial moment of degree 2, downside risk, VaR at the 5 percent level, alpha, Treynor ratio, Sharpe ratio, Sortino ratio, and M-squared. The riskless rate is 5 percent. For all measures that require a threshold or target level of return, set that level at 0 percent.

Data for End--of-Chapter Question 2
Benchmark	Risk Free	Portfolio 1	Portfolio 2
4.14%	0.49%	-0.73%	6.83%
27.79%	0.32%	35.41%	27.22%
-24.11%	0.36%	-27.54%	5.95%
-7.66%	0.37%	-11.31%	-13.99%
-19.06%	0.38%	-25.03%	-9.22%
-23.13%	0.50%	-27.82%	-7.14%
10.67%	0.40%	10.18%	3.68%
3.09%	0.36%	8.83%	3.57%
5.85%	0.50%	4.28%	22.77%
21.63%	0.51%	33.45%	4.04%
33.56%	0.41%	30.26%	18.29%
22.18%	0.46%	32.19%	9.30%
0.79%	0.46%	3.57%	0.23%
20.01%	0.43%	16.04%	1.84%
-14.18%	0.38%	-17.14%	-1.14%
9.06%	0.37%	8.59%	25.72%
-17.49%	0.48%	-22.32%	-24.86%
30.36%	0.44%	28.10%	6.67%
20.01%	0.38%	23.86%	17.22%
17.58%	0.51%	13.66%	-1.29%
19.05%	0.35%	22.22%	0.73%
5.03%	0.34%	6.01%	9.89%
10.72%	0.44%	8.01%	23.45%
15.95%	0.47%	17.78%	15.60%
21.57%	0.41%	21.07%	1.63%
25.31%	0.48%	22.87%	-2.92%
19.31%	0.47%	23.80%	28.89%
30.30%	0.38%	38.61%	13.50%
8.67%	0.47%	11.34%	5.78%
-7.18%	0.36%	-15.22%	8.65%
15.31%	0.34%	19.31%	9.90%
-6.76%	0.46%	-2.43%	-1.40%
-3.96%	0.40%	-7.77%	-1.61%
1.84%	0.34%	-0.18%	11.54%
16.34%	0.39%	15.43%	19.96%
-17.77%	0.41%	-17.35%	-2.97%
9.27%	0.32%	7.46%	1.28%
21.38%	0.46%	26.75%	13.89%
19.01%	0.48%	27.53%	11.82%
17.48%	0.34%	26.75%	5.65%
24.22%	0.35%	27.17%	20.86%
6.42%	0.48%	3.81%	14.94%
-0.08%	0.45%	2.03%	8.25%
3.90%	0.38%	2.42%	-7.63%
38.54%	0.47%	40.01%	15.73%
5.13%	0.43%	17.19%	16.12%
21.86%	0.33%	29.44%	11.64%
16.77%	0.32%	17.37%	-2.47%
27.64%	0.51%	29.17%	0.03%
20.11%	0.36%	25.27%	13.26%
14.70%	0.45%	13.46%	14.27%
16.52%	0.44%	22.52%	-16.37%
15.60%	0.38%	23.11%	-7.30%
9.32%	0.33%	15.74%	21.28%
12.22%	0.32%	13.98%	23.63%
8.00%	0.51%	6.06%	13.91%
8.49%	0.47%	13.54%	9.83%
30.44%	0.35%	32.93%	3.95%
-14.44%	0.46%	-26.44%	-0.01%
13.13%	0.44%	14.31%	9.13%
12.52%	0.37%	19.75%	7.92%
-8.11%	0.38%	-14.67%	2.68%
22.91%	0.37%	18.97%	4.83%
16.50%	0.49%	17.20%	5.28%
6.19%	0.49%	4.95%	-1.91%
18.31%	0.41%	20.33%	20.18%
12.58%	0.40%	14.01%	9.20%
11.86%	0.52%	12.96%	-3.97%
12.17%	0.43%	13.94%	13.77%
-2.40%	0.41%	-0.18%	4.64%
10.36%	0.51%	14.89%	22.61%
-10.98%	0.49%	-17.19%	5.11%
26.50%	0.41%	25.50%	-7.80%
-4.83%	0.41%	-4.54%	5.79%
-6.13%	0.47%	-10.32%	5.69%
10.47%	0.38%	9.24%	7.46%
-5.48%	0.49%	-9.75%	11.11%
33.04%	0.35%	33.54%	11.78%
10.33%	0.37%	18.86%	11.82%
33.46%	0.42%	37.48%	27.38%
-1.01%	0.43%	-5.13%	13.76%
22.42%	0.39%	17.53%	21.49%
5.65%	0.36%	1.51%	-11.68%
-3.73%	0.35%	-2.22%	10.48%
7.60%	0.34%	8.08%	7.60%
3.36%	0.52%	7.44%	0.00%
43.79%	0.51%	51.16%	21.99%
-6.07%	0.49%	-3.17%	14.51%
-2.33%	0.36%	-3.85%	-9.26%
28.94%	0.34%	36.05%	13.73%
-24.22%	0.36%	-24.64%	0.84%
26.88%	0.47%	25.59%	22.23%
0.21%	0.43%	-2.83%	-11.93%
29.26%	0.37%	28.18%	25.99%
-8.87%	0.38%	-11.49%	-10.94%
32.49%	0.47%	35.80%	16.10%
23.29%	0.44%	33.54%	9.85%
-6.80%	0.46%	-9.87%	8.93%
21.73%	0.37%	25.93%	-3.35%
-12.30%	0.37%	-14.18%	-5.90%

Compute the tracking error and information ratio for each of the active portfo- lios in Problem 2. What do these results imply about the skill of each manager? What do they imply about using each of these funds within an asset allocation based on benchmark indexes?