The Sharpe, Treynor, and Jensen portfolio performance measures are derived from the CAPM,
A)therefore, it does not matter which measure is used to evaluate a portfolio manager.
B)however, the Sharpe and Treynor measures use different risk measures.Therefore, the measures vary as to whether or not they are appropriate, depending on the investment scenario.
C)therefore, all measure the same attributes.
D)therefore, it does not matter which measure is used to evaluate a portfolio manager.However, the Sharpe and Treynor measures use different risk measures, so therefore, the measures vary as to whether or not they are appropriate, depending on the investment scenario.

Question

Quizplus · Accepted Answer

The Sharpe ratio uses standard deviation as the risk measure, while the Treynor ratio uses beta. This means they are appropriate in different scenarios depending on whether total risk or systematic risk is more relevant.

The Sharpe, Treynor, and Jensen Portfolio Performance Measures Are Derived