The measure of performance which divides the portfolio's risk premium by the portfolio's beta is the
A) Sharpe measure.
B) Jensen measure.
C) Fama measure.
D) Information Ratio.
E) Treynor measure.

Question

Quizplus · Accepted Answer

The measure described in the question is the Treynor measure, which is calculated by dividing the excess return (the risk premium) of a portfolio by its beta. The Treynor measure is used to evaluate the performance of a portfolio by adjusting for the level of risk taken to achieve the return. Therefore, the correct choice is (E).

The Measure of Performance Which Divides the Portfolio's Risk Premium