Jordan Jones (JJ) and Casey Carter (CC) are portfolio managers at your firm. Each manages a well-diversified portfolio. Your boss has asked for your opinion regarding their performance in the past year. JJ’s portfolio has a beta of 0.6 and had a return of 8.5%; CC’s portfolio has a beta of 1.4 and had a return of 9.5%. Which manager had better performance? Why?
Let the Risk Free Rate (Rf) is 5%
Treners Ratio = (Return of Portfolio - Rf) / Beta
Treners Ratio of JJ = (0.085- 0.05) / 0.6 = 0.05833
Treners Ratio of CC = (0.095- 0.05) / 1.4 = 0.03214
Treners Ratio of JJ is better.
Return per risk (beta) for JJ is better than CC.
NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.
Jordan Jones (JJ) and Casey Carter (CC) are portfolio managers at your firm. Each manages a...