Finall Answer:
Portfolio P outperformed the market based on its superior Sharpe, Jensen (alpha), and Treynor measures.
Step-by-step explanation:
Portfolio P's outperformance against the market, as measured by Sharpe, Jensen (alpha), and Treynor ratios, signifies its ability to generate higher risk-adjusted returns. The Sharpe ratio assesses the return earned per unit of total risk taken (both systematic and unsystematic). A higher Sharpe ratio indicates better risk-adjusted performance, suggesting that Portfolio P generated superior returns relative to the risk taken compared to the market.
Similarly, the Jensen (alpha) measures the excess return of a portfolio compared to what would be expected from its level of risk, using the Capital Asset Pricing Model (CAPM). A positive alpha indicates that Portfolio P earned more than its expected return, surpassing the market's performance after adjusting for risk. This suggests skilled management or the potential for undervalued assets within Portfolio P.
Furthermore, the Treynor ratio evaluates the returns earned per unit of systematic risk, measured by beta. A higher Treynor ratio implies a better risk-adjusted return for each unit of market risk taken. Portfolio P's outperformance in this measure suggests that it delivered higher returns considering the systematic risk undertaken, outshining the market in this aspect as well.
These measures collectively highlight Portfolio P's ability to generate superior risk-adjusted returns compared to the market during the specified period.