Which of the following performance measures is best described as a measure of excess return per unit of risk of obtaining excess returns? A. Sharpe ratio. B. Treynor measure. C. Information ratio. D. Jensen's alpha.
Jensen’s alpha is the excess return over the return predicted by CAPM. The Treynor measure is equal to the risk premium divided by beta. The Sharpe ratio is a measure of excess returns (over the risk-free rate) per unit of total risk.
