Consider the following historical performance data for two different portfolios, the Stan- dard and Poor's 500, and the 90-day T-bill.
Investment Vehicle
Average Rate of Return
Standard
Deviation Beta R 2
|
Fund 1
|
26.40%
|
20.67%
|
1.351
|
0.751
|
|
Fund 2
|
13.22
|
14.20
|
0.905
|
0.713
|
|
S&P 500
|
15.71
|
13.25
|
|
|
|
90-day T-bill
|
6.20
|
0.50
|
|
|
a. Calculate the Fama overall performance measure for both funds.
b. What is the return to risk for both funds?
c. For both funds, compute the measures of (1) selectivity, (2) diversification, and (3) net selectivity.
d. Explain the meaning of the net selectivity measure and how it helps you evaluate investor performance. Which fund had the best performance?