Question

If a mutual fund portfolio earned a return that exceeded the return on the S&P 500 stock index, you may conclude that the fund outperformed the market on a risk-adjusted basis. a. True b. False

Answer 1

Answer:

The correct answer is letter "A": True.

Explanation:

Risk-adjusted return is a measurement of risk for an investment or portfolio. It involves comparing the return of the investment or portfolio against the benchmark which is the overall performance of the market (typically compared with the S&P 500 index). For that purpose, the approach makes use of indicators such as the alpha, beta or standard deviation. Beta measures how correlated is the movement of a security according to the overall market movement. If a stock exceeds the return of the S&P 500 index, it means it is outperforming the market.