medium · CFA Level I pm
Westfork Bancorp is examining the 'residual risk spike' in one of its specialized credit portfolios.
If the portfolio's idiosyncratic (unsystematic) risk increases while its beta and the market risk premium remain constant, which of the following will most likely occur?
- Both the Sharpe and Treynor ratios will decrease.
- The Sharpe ratio will decrease while the Treynor ratio remains unchanged.
- The Jensen's alpha will decrease.
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