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Unit 10 & 11 Portfolio Evaluation-pdfux-delete-pdfux-add-blank

The document discusses the evaluation of mutual fund performance through various metrics such as return, risk, beta, Sharpe's Ratio, Treynor's Ratio, and Jensen's Measure. It includes specific case studies and calculations for multiple funds in comparison to market indices and risk-free rates. The analysis aims to rank and assess the performance of these funds using established financial frameworks.

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19 views12 pages

Unit 10 & 11 Portfolio Evaluation-pdfux-delete-pdfux-add-blank

The document discusses the evaluation of mutual fund performance through various metrics such as return, risk, beta, Sharpe's Ratio, Treynor's Ratio, and Jensen's Measure. It includes specific case studies and calculations for multiple funds in comparison to market indices and risk-free rates. The analysis aims to rank and assess the performance of these funds using established financial frameworks.

Uploaded by

aditi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MEASURING AND

EVALUATING PORTFOLIO
PERFORMANCE
 Q.1. The return and risk figures of two mutual funds
and the stock market index are given below:

Fund Return(%) Standard Beta


Deviation (%)

Dr. Alaknanda Lonare


A 12 18 0.7
B 19 25 1.3
Market index 15 20 1.0

 Evaluate the performance of the two mutual funds if


risk free rate of return is 7%.
 Q.2. An investor owns a portfolio that over the last
five years has produced 16.8% return. During that
time the portfolio produced a 1.10 beta. Further, risk
free return and the market averaged 7.4% and 15.2%
per year respectively. How would you evaluate the
performance of the portfolio?

Dr. Alaknanda Lonare


 Q.3. The following results were obtained from
study for a period of six months in 2018:
Portfolio Rp Standard Correlation
Deviation Coefficient
between Market
and Portfolio

Dr. Alaknanda Lonare


A 18 27 0.8
B 14 18 0.6
C 15 8 0.9
Market 13 12 -
Risk-Free 9 - -
Interest Rate

 Rank these portfolios using Sharpe’s Ratio and


Treynor’s Ratio.
 Q.4. A mutual fund analyst has collected the following
past performance report of 5 funds and Nifty:
Fund Return(%) Standard Beta
Deviation
A 16.5 25.6 1.25

Dr. Alaknanda Lonare


B 15.3 20.5 0.95
C 9.5 15.8 0.85
D 22.5 16.5 1.15
E 18.5 18.5 1.05
Market 14.0 13.5 1.00
 Based on the above information, you are required to
rank the funds on Sharpe ratio, Treynor ratio and
Jensen’s Measure. Assume that the risk free rate is
7%. Explain behavior of ranking.
 Q.5. Information regarding two mutual funds and the
stock market index are given below:
Fund Return(%) Standard Beta
Deviation (%)
SBI Fund 7 15 0.72

Dr. Alaknanda Lonare


HDFC Fund 16 35 1.33
Market index 10 24 1.0

 Risk free rate of return is 5%


 Calculate net selectivity measure for the both the
funds and evaluate the performance using Fama’s
framework of performance components.
 Q.6. A mutual fund has earned an average annual
return of 24% over a five years period while the
average market return over the same period was only
18%. The risk free rate prevailing at the time was
7.5%. The mutual fund had a beta of 1.45. The
standard deviation of returns of the mutual fund and

Dr. Alaknanda Lonare


the market index were 40% and 30% respectively.
 Calculate Fama’s net selectivity for the fund, showing
the decomposition of performance.

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