- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 2. Portfolio Risk and Return: Part II
- Subject 7. Portfolio Performance Appraisal Measures
CFA Practice Question
Which measure is the maximum amount you should be willing to pay for an investment manager to manage your money?
B. M-squared
C. Jensen's Alpha
A. Treynor ratio
B. M-squared
C. Jensen's Alpha
Correct Answer: C
User Contributed Comments 3
| User | Comment |
|---|---|
| Emily1119 | Can anyone explain this question? |
| johntan1979 | Jensen's Alpha measures the excess or abnormal return over the theoretical expected return. You shouldn't pay your fund manager more than this amount, logically-speaking. |
| ascruggs92 | Jensen's Alpha measures excess return over the market. If a money manager charges you 1% but he only generates 0.5% alpha annualized, then his clients will end up under-performing after paying fees. |