Information ratio: Difference between revisions
WikiSysopIG (talk | contribs) Created page with "'''Information ratio''' ('''IR''') is a measure of the risk-adjusted performance of an investment portfolio relative to its benchmark. It compares the average active return generated by a portfolio with the variability of those active returns, commonly measured by tracking error. ==Calculation== The information ratio is commonly calculated as: <math> \text{Information Ratio} = \frac{\text{Average Active..." |
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\text{Sharpe Ratio} | \text{Sharpe Ratio} | ||
= | = | ||
\frac{R_p-R_f} | \frac{R_p-R_f}{\sigma(R_p)} | ||
{\sigma(R_p)} | |||
</math> | </math> | ||
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\text{Information Ratio} | \text{Information Ratio} | ||
= | = | ||
\frac{R_p-R_b} | \frac{R_p-R_b}{\sigma(R_p-R_b)} | ||
{\sigma(R_p-R_b)} | </math> | ||
where: | |||
* <math>R_p</math> = portfolio return; | |||
* <math>R_b</math> = benchmark return; | |||
* <math>R_f</math> = risk-free rate; | |||
* <math>\sigma(R_p)</math> = standard deviation of portfolio returns; | |||
* <math>\sigma(R_p-R_b)</math> = standard deviation of active returns. | |||
==Portfolio management== | ==Portfolio management== | ||