Consider the following historical performance data for two different portfolios, the Standard and Poor’s 500, and the 90-day T-bill.
InvestmentVehicle
Average Rateof Return
StandardDeviation
Beta
R2
Fund 1
26.40%
20.67%
1.351
0.751
Fund 2
13.22
14.2
0.905
0.713
S&P 500
15.71
13.25
90-day T-bill
6.2
0.5
a. Calculate the Fama overall performance measure for both funds.
b. What is the return to risk for both funds?
c. For both funds, compute the measures of (1) selectivity, (2) diversification, and (3) net selectivity.
d. Explain the meaning of the net selectivity measure and how it helps you evaluate investor performance. Which fund had the best performance?
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