This practice question set consists of 18 pages reviewing the concepts of:
* Differentiate between time-weighted and dollar-weighted returns of a portfolio and describe their appropriate uses.
* Describe and distinguish between risk-adjusted performance measures, such as Sharpe’s measure, Treynor’s measure, Jensen’s measure (Jensen’s alpha), and information ratio.
* Describe the uses for the Modigliani-squared and Treynor’s measure in comparing two portfolios, and the graphical representation of these measures.
* Determine the statistical significance of a performance measure using standard error and the t-statistic.
* Explain the difficulties in measuring the performance of hedge funds.
* Describe style analysis.
* Explain how changes in portfolio risk levels can affect the use of the Sharpe ratio to measure performance.
* Describe techniques to measure the market timing ability of fund managers with a regression and with a call option model, and compute return due to market timing.
* Describe and apply performance attribution procedures, including the asset allocation decision, sector and security selection decision, and the aggregate contribution.
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