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The following data are available relating to the performance of Marie Holdings Stock Fund and the market portfolio: Marie Holdings Market Average Return 0
The following data are available relating to the performance of Marie Holdings Stock Fund and the market portfolio:
| Marie Holdings | Market | |
| Average Return | 0.11 | 0.15 |
| Std. Dev. of Returns | 0.29 | 0.30 |
| Beta | 0.90 | 1.00 |
| Tracking Error | 0.13 | - |
| Average PE | 16.00 | 15.00 |
The risk-free rate during the sample period was 0.07.
Calculate the M2 measure of performance for Marie Holdings Fund.
Select one:
a. -0.3077
b. 0.1379
c. -0.0320
d. none of these, or insufficient information
e. 0.0444
Expert Solution
Answer - (D) - none of these, or insufficient information
Calculate the M2 measure of performance for Marie Holdings Fund.
M2 Measure of Marie Holdings Fund
= (Std. Dev. of market /Std. Dev. Of Marie Holdings Fund) *(expected return of Marie Holdings Fund – risk free rate) + risk free rate
= (0.30/0.29) * (0.11 – 0.07) + 0.07
= (1.03448) * (0.04) + 0.07
= 0.04137 + 0.07
= 0.1114
Where,
Std. Dev. of market = 0.30
Std. Dev. Of Marie Holdings Fund = 0.29
Return of Marie Holdings Fund = 0.11
Risk free rate = 0.07
The M2 measure of performance for Marie Holdings Fund is 0.1114 or 11.14%
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