You observe three mutual funds with the following statistics

Finance Dec 21, 2020

You observe three mutual funds with the following statistics. You are considering adding one of these funds into a diversified portfolio with ten other mutual funds. Which one should you pick? Fund Sharpe Ratio Treynor Ratio Mutual Fund A 1.45 11.874 Mutual Fund B 1.37 12.472 Mutual Fund C 1.32 10.878 Mutual Fund A O Mutual Fund B O Mutual Fund C

Expert Solution

We should select Mutual Fund B as it has the highest Treynor Ratio, which captures beta-the relevant measure of risk for well diversified portfolios

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