Financial Risk Manager Part 1
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The CIO of a pension fund is assessing several actively managed equity funds to add to the pension fund's portfolio. As part of this assessment, the CIO examines the suitability of various measures to evaluate the performance of outside managers and considers how each measure is calculated. Which of the following statements is correct regarding the given performance measure?
A
The Sharpe performance index calculates the ratio of the return of a portfolio to the return of the benchmark against which the portfolio is compared.
B
The tracking error calculates the standard deviation of a portfolio's active return.
C
The Sortino ratio calculates the ratio of the return of a portfolio to the standard deviation of returns above the portfolio's target rate of return.
D
The information ratio calculates the difference between the return of a portfolio and the return of the benchmark against which the portfolio is compared.