Investment Jobs Portfolio Analysis Test

Question 1

Which portfolio performance metric measures return per unit of total risk (standard deviation)?

Accepted Answer

Sharpe ratio

Answer

Treynor ratio

Answer

Jensen's alpha

Answer

Information ratio

Question 2

Beta in portfolio analysis measures a security's sensitivity relative to what?

Accepted Answer

The market portfolio

Answer

The risk-free rate

Answer

The portfolio's own historical volatility

Answer

Inflation

Question 3

What does a negative alpha indicate about a portfolio manager's performance?

Accepted Answer

The portfolio underperformed its benchmark on a risk-adjusted basis

Answer

The portfolio outperformed its benchmark on a risk-adjusted basis

Answer

The portfolio has negative correlation with the market

Answer

The portfolio's volatility exceeds the benchmark

Question 4

Which correlation coefficient value indicates perfect negative correlation between two assets?

Accepted Answer

-1

Answer

0

Answer

+1

Answer

0.5

Question 5

The efficient frontier in Modern Portfolio Theory represents portfolios that offer:

Accepted Answer

Maximum return for a given level of risk

Answer

The highest possible return regardless of risk

Answer

Zero systematic risk

Answer

100% diversification

Question 6

What is 'tracking error' in the context of portfolio management?

Accepted Answer

The standard deviation of the difference between portfolio and benchmark returns

Answer

The difference between a portfolio's return and its benchmark return

Answer

A clerical error in trade execution

Answer

The cost of rebalancing a portfolio