Jensen's alpha -- question about a term in the Study Notes

[sridhar]

Couple of quick things:

1. On page 15/78 of the investment risk module, you introduce a t-statistic for Jensen's alpha. What is the denominator --- omega(p) -- I don't see this term introduced?

2. Typo: On page 10/78, under the section "Portfolio Performance", you have the sentence: .....The Treynor and Sharpe have the same denominator......It should say "numerator."

--sridhar

 

[David Harper CFA FRM]

Sridhar -

1. That's Grinold where omega = tracking error (residual risk).
So: information ratio * SQRT[T] = t-stat,
where IR = residual (active excess) return / TE.

The Amenc reading, IMO, is better on this, see p 114 - 115. On 115, he has:

IR ~ t stat/SQRT(T), which is exactly the same as Grinold's
t stat ~ IR * SQRT(T)

I just today uploaded several new EditGrid XLS. In case you'd like to see this "in action," here is brief list of these RAPMs and t stat.

(EditGrid now supports range names, which is great b/c you follow the calcs much better)

2. Yes, oops, thanks

David

 

[sridhar]

Thanks David...As the resident nitpicker(!), your Edit Grid menus, at least for the spreadsheet you mention in this post -- the menus are all in French. Are you vacationing in Provence

 

[David Harper CFA FRM]

sridhar,

Thanks truly for alerting me to this (as i can't replicate it myself), I am not sure, but I asked EditGrid, they are great about fixing stuff.

Vacationing in France sounds terrific, thanks for mentioning a lovely place where i cannot be ...no plans for time off until after, er, Nov 15th

David

 

[David Harper CFA FRM]

sridhar,

EditGrid replied back, they wondered if you are an EditGrid user and, if so, that perhaps your settings are in French:

From EditGrid (source here)

David,
It's possible that the user is also an EditGrid user and has set the language preference to French. So if s/he's already logged in and when he opens any spreadsheets, including those that are owned by others, s/he will see the French menu.
Let us know if this is the case.
Angus

sridhar, if you get a chance to let me know if this is the case, that would be great. David