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During the last fifteen years, Norma, a portfolio manager, earned excess returns (over risk-free rate) of 16% with a standard deviation of 12%. During the same time period, excess returns (over risk-free rate) and standard deviation of a benchmark portfolio were 11% and 14% respectively. Norma claims to have beaten the benchmark portfolio at 95% confidence level. Based on our estimation:
I. we reject her claim. II. we fail to reject her claim. Which of the above statements is (are) CORRECT given that the t-statistic for the Sharpe ratio is 1.5? A. II only. B. I only. C. Both I and II. D. Neither I nor II. |