The ____ index can be used to measure risk-adjusted performance of a stock while controlling for the stock's volatility.
A) Sharpe
B) Treynor
C) arbitrage
D) margin

Question

Quizplus · Accepted Answer

The Sharpe ratio is designed to measure the excess return (or risk premium) of a stock or investment portfolio above a risk-free rate of return, relative to the volatility of the investment. It is therefore a risk-adjusted performance measure that takes into account the volatility of an investment in assessing its return. The Treynor ratio, on the other hand, measures the excess return per unit of systematic risk (as measured by beta). While this ratio also adjusts for risk, it does not take into account the total volatility of the investment. The arbitrage index and margin index are not widely used measures of performance, and are not relevant to this question.

The ____ Index Can Be Used to Measure Risk-Adjusted Performance