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PRO FORMA INCOME STATEMENT
Presented To:Prof. Dipti bhatt
Presented By:
Krupa Shah(23)
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FLOW OF PRESENTATION
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Sharpe and Treynor measures
Jensen measure
Performance measurement in practice
Traditional
Performance Measures
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Sharpe and
Treynor Measures (contd)
The Treynor measure evaluates the return
relative to beta, a measure of systematic
risk It ignores any unsystematic risk
The Sharpe measure evaluates returnrelative to total risk
Appropriate for a well-diversified portfolio,
but not for individual securities
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Sharpe and
Treynor Measures (contd)Example
Over the last four months, XYZ Stock hadexcess returns of 1.86%,
-5.09%, -1.99%, and1.72%. The standard deviation of XYZ
stockreturns is 3.07%. XYZ Stock has a beta of
1.20.
What are the Sharpe and Treynor measures forXYZ Stock?
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Sharpe and
Treynor Measures (contd)Example (contd)
Solution: First compute the average excess
return for Stock XYZ:
1.86% 5.09% 1.99% 1.72%
4
0.88%
R
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Sharpe and
Treynor Measures (contd)
Example (contd)
Solution (contd): Next, compute the Sharpe and
Treynor measures:
0.88%Sharpe measure 0.29
3.07%0.88%
Treynor measure 0.731.20
f
f
R R
R R
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Jensen Measure
The Jensen measure stems directly from the
CAPM:
it ft i mt ft
R R R R
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Jensen Measure (contd)
The constant term should be zero
Securities with a beta of zero should have an
excess return of zero according to finance
theory
According to the Jensen measure, if a
portfolio manager is better-than-average,
the alpha of the portfolio will be positive
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Jensen Measure (contd)
The Jensen measure is generally out of
favor because of statistical and theoretical
problems
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Top 10 mutual fund schemeRank Scheme Name NAV (Rs.)
1 Franklin India Opportunity Fund - Dividend 12.4836
2 Reliance Gold Exchange Traded Fund - Dividend 2604.749
3 SBI Gold Exchange Traded Scheme 2727.2559
4 UTI Gold Exchange Traded Fund 2676.2736
5 Kotak Gold ETF 2675.2038
6 Quantum Gold Exchange Traded Fund - Growth 1331.1709
7 Religare Gold Exchange Traded Fund 2749.4375
8 HDFC Gold Exchange Traded Fund 2729.5815
9 ICICI Prudential Gold Exchange Traded Fund 2746.7947
10 Axis Gold ETF 2727.4183
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