The fund with the highest Sharpe measure is
You want to evaluate three mutual funds using the Sharpe measure for performance evaluation. The risk-free return during the sample period is 6%. The average returns, standard deviations, and betas for the three funds are given below, as are the data for the S&P 500 Index.
A. Fund A.
B. Fund B.
C. Fund C.
D. Funds A and B (tied for highest).
E. Funds A and C (tied for highest).
C. Fund C.
A: (24% 6%)/30% = 0.60;
B: (12% 6%)/10% = 0.60;
C: (22% 6%)/20% = 0.80; S&P 500: (18% 6%)/16% = 0.75.
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