Performance Appraisal Method Selection

Maria is an investment manager who has been managing a diversified equity portfolio for the past year. At the end of the year, she presents her performance results to her clients. The portfolio achieved a return of 12%, while the benchmark index returned 9% during the same period. Maria states that her fund outperformed the benchmark, and she attributes this success to her selection of high-performing stocks.

In evaluating Maria’s performance, it is essential to consider the risk taken in the portfolio management process. The clients are curious to know which method of performance appraisal would best illustrate Maria's skill in stock selection, given the return data.