Financial Investment Performance and Risk Analysis Quiz

Standard deviation measures the extent to which returns deviate from the mean return.

Sharpe ratio is a measure of risk-adjusted return, not a standalone measure of risk.

Sharpe ratio evaluates the risk-adjusted return, assessing how much excess return an investment generates per unit of volatility.

Beta quantifies a stock's volatility relative to the market, indicating its sensitivity to market movements.

Information ratio assesses the return of an investment adjusted for its risk, helping to evaluate investment performance.

Alpha indicates the additional return generated by an investment beyond what would be expected given its risk level and market conditions.

Treynor ratio assesses the return earned in excess of the risk-free rate per unit of systematic risk.

Value at Risk (VaR) quantifies the maximum potential loss that a portfolio may face within a given time frame at a certain confidence level.

CAGR computes the annual growth rate of an investment over a specified time period.

A lower beta indicates lower volatility and thus lower risk, according to CAPM.

Sortino ratio emphasizes the downside risk by considering only volatility related to negative returns.

Drawdown measures the largest decrease in value experienced by an investment during a specific period.

Treynor ratio formula calculates the excess return adjusted for systematic risk.

The Fama-French model considers three factors to explain stock returns: market risk, size, and value.