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Basic Question 5 of 8
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
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. |
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Learning Outcome Statements
calculate and interpret the Sharpe ratio, Treynor ratio, M2, and Jensen's alpha
CFA® 2025 Level I Curriculum, Volume 2, Module 2.