Page 334 - DCOM504_SECURITY_ANALYSIS_AND_PORTFOLIO_MANAGEMENT

Unit 13: Portfolio Performance Evaluation

5. Managers with a forecast of a declining market can position a portfolio by shifting resources Notes
from stocks to ................
6. The ................ performance measures primarily provide an analysis on the overall
performance of a portfolio.
7. The Jensen measure does not evaluate the ability of the portfolio manager to ................
8. ................ measure is an absolute measure of performance, adjusted for risk.

9. The ................ measure evaluates the portfolio manager on the basis of both rate of return
and diversification.
10. The less diversified fund will show ................ risk when using standard deviation.

11. A larger T value indicates a larger slope and a better portfolio for all investors regardless
i
of their risk ................
12. A variation of the Sharpe ratio is the ................ ratio, which removes the effects of upward
price movements on standard deviation.
13. When ................ cash flows are generated, new units can be added to the existing portfolio.
14. ................ rate of return is the weighted average of the internal rates of return for the sub-
periods between the cash flows and it is weighted by the length of the sub-periods.
15. The calculation of portfolio return becomes complicated when there exist certain additions
or withdrawals into the funds during the specific ................period.

13.8 Review Questions

1. Using a recent NSE and BSE website, find the closing value of the NIFTY stock and Sensex
and compare the same. Write a comment on variation, if any.

2. Under what performance measurement circumstances might the dollar-weighted return
be preferred to the time-weighted one?
3. How is unit value method different from the dollar-weighted rate method?

4. Mr. Hasanabba provides you following data for a particular period of one month:
Portfolio (P) Market (M)
Average Return 0.35 0.28
Beta 1.2 1.0
Standard deviation 0.42 0.30
Non-systematic risk 0.18 0

Calculate the following performance measure for portfolio P and the market: Sharpe,
Jenson, Treynor, Appraisal ratio. The risk-free rate during the period was 0.06. By which
measures did portfolio P outperform the market?
5. With a risk-free rate of 10% and with the market portfolio having an expected return of
20% with a standard deviation of 8%, what is the Sharpe index for portfolio Mahindra,
with a mean of 14% and a standard deviation of 18%? For portfolio HDFC, having a return
of 20% and a standard deviation of 16%, would you rather be in the market portfolio or
one of the other two portfolios?

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