Information Ratio


Also found in: Acronyms, Wikipedia.

Information Ratio

The ratio of annualized expected residual return to residual risk. A central measurement for active management, value added is proportional to the square of the information ratio.

Information Ratio

In statistics, a measure of expected return to risk as a standard deviation. The information ratio is used in active management to gauge a manager's performance against some benchmark. See also: Manager Universe.
References in periodicals archive ?
The result is an investment approach that has historically delivered high information ratios - a key measure of risk-adjusted excess return, investment efficiency, and consistency - across most of INTECH's investment strategies.
In this paper, we have analyzed the effects of skewness and kurtosis of portfolio and benchmark returns on the precision of the estimation of two of the most popular performance measures: the Sharpe ratio and the information ratio.
The result is an investment approach that has historically delivered high information ratios, a key measure of risk-adjusted excess return, investment efficiency, and consistency long term.
The higher the Information Ratio the more consistent a manager is and consistency is usually an ideal trait in a portfolio manager.
A fourth composite measure of portfolio performance that is widely used in the asset management industry is the information ratio, which is a risk-adjusted performance statistic that takes the return on a managed portfolio in excess of the returns on a benchmark portfolio and divides this by the standard deviation of this excess return.
In this paper, we have extended his work to the information ratio (IR).
05 1999:Q2-2002:Q1 Bank Non-bank Mean information ratio 0.
80 10 Sum of Standalone Active Risks Less Diversification Benefit Total Active Fixed-Income Tracking Error (annualized) Target Gross Excess Return (annualized) Active Risk Information Ratio Optimized Target Active Strategy Basis Points Duration/Yield Curve 45 Country Exposure 25 Sector Rotation 39 Security Selection: Government/Agency 10 Mortgage-Backed/Asset-Backed 25 Securities Corporate Credit 30 High Yield 10 Emerging Market Debt 10 Sum of Standalone Active Risks 192 Less Diversification Benefit -92 Total Active Fixed-Income Tracking 100 Error (annualized) Target Gross Excess Return 90 (annualized) Active Risk Information Ratio 0.
Since the information ratio indicates the level of excess return divided by the volatility incurred relative to the benchmark, it is an indicator of the potential persistency of alpha generation.
This strategy seeks higher excess returns and tracking error targets, but at approximately the same market risk and information ratio levels.
Constrained/optimized Sharpe ratio & information ratio
1) The iGAP strategy has achieved an information ratio greater than one, net of fees since inception.
Full browser ?