3. Objectives of portfolio
• Maximum return with minimum risk
• Allocation of fund
• Transfer of risk
• Combination of securities
• Professional service
• Expert advice
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4. Portfolio evaluation
• To identify sources of strength or weakness
• As Control mechanism
• For comparison
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6. Sharp’e Measure
• It measures return relative to total risk
• Risk is predominately from systematic risk
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7. =( 𝑅 - Rf ) / σ
• 𝑅 = Average return
• Rf = Risk free return
• σ = standard deviation of return
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8. • Birla SL Frontline Equity (G) and SBI Blue Chip Fund
(G) are two portfolios. Birla SL Frontline Equity (G)
has a sample mean of success 12% and SBI Blue
Chip Fund (G) has a sample mean of success 16%.
The respective standard deviation are 15% and
18%. The mean return for the market index is 12
and standard deviation is 8% while the risk free rate
of return is 8%.
• Compute the sharpe index for the portfolios and
market and comment
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9. Birla Sun Life Top 100 (G) Kotak Select Focus Fund -
Regular (G)
Average Return 17 15
Standard deviation 16 12
Risk free rate 9.5 9.5
Compute the sharp’e index for the
portfolios and market and comment
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12. Portfolio Average Return Beta Standard Deviation
L&T India Value
Fund (G)
18 2 3
Principal Emerging
Bluechip(G)
12 1.5 2
The risk free rate of return is 9%. The rate of
return on market portfolio is 15%. The standard
deviation on market is 6%.
Compute Treynor’s and sharpe index for
portfolio and evaluate portfolio’s performance.ingleyogeshh@gmail.com
13. Jensen’s Measure
• It is based on CAPM
• It express relationship between risk and return
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14. Ki=Rf +β (Km – Rf)
• Ki= Required or Expected rate of return on
security
• Rf= Risk free rate of return
• β= Beta of security
• Km= Expected rate of return on market
portfolio
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15. • You are required to rank these portfolios
according to Jensen’s measure of Portfolio
evaluation.
Portfolio Return on portfolio Portfolio beta Risk free interest
rate
Franklin Build India
Fund (G)
15 1.2 8
Kotak Infras. & Eco
Reform -Standard
(G)
12 0.8 8
Tata India Tax
Savings Fund - Reg
(D)
16 1.5 8
Market Index 13 1.0 8
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16. You are required to rank these portfolios
according to Sharpe, Treynor and Jensen’s
measure. Risk free rate of return is 8%
Portfolio Return on portfolio Portfolio beta Standard deviation
Franklin Build India
Fund (G)
15 1.25 0.25
Kotak Infras. & Eco
Reform -Standard
(G)
12 0.75 0.75
Tata India Tax
Savings Fund - Reg
(D)
10 1.10 1.10
Market Index 12 1.20 1.20
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