Important Points for IC 99 - Asset Management Exam
Page 72 Of 109
Go to:
The risk-adjusted methods make adjustments to returns in order to take account of the differences in risk levels between the managed portfolio and the benchmark portfolio. There are many such methods for this purpose. The most popular methods are : i) Sharpe ratio (S), ii) Treynor ratio (T), iii) Jensens alpha (a), iv) Modigliani and Modigliani (M2), and v) Treynor Squared (T2)
Modern Portfolio Theory describes the resulting risk and return of a combination of individual assets. A primary objective of the theory is to identify asset combinations that are efficient.
Modern Portfolio Theory (MPT) works on the concept and principle of diversification in investing by using mathematical or statistical data and information. It aims to select a set of investment assets which present lower risk than any individual asset.
Modern Portfolio Theory stresses on the diversification and increase of securities. It assists the portfolio managers in finding the best possible diversification strategy.
An optimal stock portfolio refers to a stock portfolio that incorporates the stocks configured in such a manner that they yield the optimal return statistically possible at a given level of risk assepted by an investor.
MODELEXAM® 
www.realsoftinfoplan.com