Which of the following measures are dependent upon the accuracy of a security's beta?
I. Sharpe ratio
II. Treynor ratio
III. Jensen's alpha
A)I only
B)II only
C)I and II only
D)II and III only
E)I, II, and III

Question

Quizplus · Accepted Answer

The Treynor ratio and Jensen's alpha both depend on the accuracy of a security's beta. The Treynor ratio uses beta to measure the risk-adjusted performance of an investment portfolio, while Jensen's alpha uses beta to determine the abnormal return of a portfolio or stock. The Sharpe ratio, however, is based on standard deviation, not beta, to measure risk-adjusted performance.

Which of the Following Measures Are Dependent Upon the Accuracy