Questions
Single choice
The Sharpe ratio
Options
A.measures the systematic (market) risk
B.measures the idiosyncratic (individual) stock risk
C.measures the marginal return for risk
D.measures the marginal propensity to consume
E.measures risk of a portfolio
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Step-by-Step Analysis
When evaluating the Sharpe ratio, we need to assess what each statement claims about the metric's interpretation and scope.
Option 1: 'measures the systematic (market) risk' — This is inaccurate. The Sharpe ratio does not isolate systematic risk; it compares overall portfolio or asset excess return to total risk (standard deviation), which includes both systematic and idiosyncrat......Login to view full explanationLog in for full answers
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