In the context of fixed income analysis, which measure reflects systematic risk compensation?

The Treynor measure is the correct choice because it specifically assesses the risk-adjusted performance of an investment portfolio relative to its systematic risk, as represented by beta. This ratio measures how much excess return is earned for each unit of risk taken, hence providing a clear metric for compensation for bearing systematic risk.

In a fixed income context, where interest rate movements and market conditions can significantly impact returns, the Treynor measure serves as a vital tool for investors looking to evaluate portfolio performance against market volatility. It helps indicate whether a portfolio manager is effectively generating returns in excess of what would be expected based on the portfolio's exposure to systematic risk.

Other measures, such as Jensen's alpha, evaluate performance relative to a benchmark but do not directly relate to systematic risk compensation in the same way. The Sharpe ratio, while it assesses risk-adjusted returns, includes both systematic and unsystematic risk, making it broader than the Treynor measure. Lastly, the security selection effect pertains to the impact of choosing individual securities rather than a measure of risk compensation, focusing instead on the ability to outperform a benchmark through selection rather than overall systematic risk exposure.