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You want to evaluate three mutual funds using the Jensen measure for performance evaluation. The risk-free return during the sample period is 6%, and the
You want to evaluate three mutual funds using the Jensen measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 18%. The average returns, standard deviations, and betas for the three funds are given below.
| Average Return | Residual Standard Deviation | Beta | ||||||||||
| Fund A | 17.6 | % | 10 | % | 1.2 | |||||||
| Fund B | 17.5 | % | 20 | % | 1.0 | |||||||
| Fund C | 17.4 | % | 30 | % | 0.8 | |||||||
The fund with the highest Jensen measure is
Multiple Choice
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Fund A.
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Fund B.
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Fund C.
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Funds A and B (tied for highest).
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Funds A and C (tied for highest).
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