Chartered Investment Manager (CIM) Practice Exam · Question
When assessing performance, what does the Treynor Ratio specifically aim to measure?
The Treynor Ratio measures the excess return per unit of systematic risk (beta), making it suitable for evaluating diversified portfolios where unsystematic ris
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Question: When assessing performance, what does the Treynor Ratio specifically aim to measure?
Answer options:
- Return per unit of total risk (standard deviation). ✅ Return per unit of systematic risk (beta).
- The portfolio's alpha relative to its benchmark.
- The portfolio's highest historical return.
Correct answer: Return per unit of systematic risk (beta).
Explanation: The Treynor Ratio measures the excess return per unit of systematic risk (beta), making it suitable for evaluating diversified portfolios where unsystematic risk is largely diversified away.
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