Explanation:
When evaluating an active portfolio manager who is benchmarked against a specific index (like the Russell 2000 growth index), relative risk and performance metrics are the most appropriate.
Conversely, metrics like VaR and Sharpe ratio measure absolute risk and absolute risk-adjusted return, which are better suited for managers without specific relative benchmarks.
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Q.58 Excel Investment Firm recently hired an active manager for its pension fund. Her benchmark is the Russell 2000 growth index. Which of the following statistics are most suitable to evaluating the manager’s performance and risk?
A
VaR and information ratio
B
Tracking error and sharpe ratio
C
Tracking error and information ratio
D
VaR and sharpe ratio
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