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Question 1

What is the difference between performance measurement and performance evaluation

Answer 1

PM - what return is achieved
PE - how was return achieved

Question 2

Money weighted return

Answer 2

Measures overall return on capital invested over set time period

Question 3

Time-weighted return

Answer 3

Slows comparison of performance between fund managers

Question 4

What is the purpose of sharpe ratio?

Answer 4

To find out if portfolio returns are from good investment decisions or excess risk

Question 5

What is better a higher or lower sharpe ratio?

Answer 5

Higher the better, as shows the amount an investment is out performing a risk free investment

Question 6

What is the purpose of alpha calculation?

Answer 6

To compare investment returns to the beta/benchmark

Question 7

What is better a higher or lower alpha?

Answer 7

Higher the better as this shows it outperformed the benchmark

Question 8

What is the purpose of the information ratio?

Answer 8

Shows ability of a fund manager to ourpeorform the beta/benchmark

Question 9

What is better higher or lower for the information ratio?

Answer 9

Higher the better as shows fund manager outperformed the beta/benchmark

Question 10

What is performance evaluation steps?

Answer 10

Evaluate each step to build an overall picture

Question 11

How to calculate contribution to return

Answer 11

Multiply benchmark allocation and percentage return