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Information ratio - Wikipedia
The information ratio, also known as appraisal ratio, measures and compares the active return of an investment (e.g., a security or portfolio) compared to a benchmark index relative to the volatility of the active return (also known as active risk or benchmark tracking risk). It is defined as the active return (the difference between the returns of the investment and the returns of the benchmark) divided by the tracking error (the standard deviationof the active return, i.e., the additional risk). It represents the additional amo…
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Information Ratio Formula | How to Calculate Information ...
Mar 19, 2019 · Explanation of the Information Ratio Formula Firstly, gather the daily return of a particular investment portfolio over the course of a significant period of time,... Now, determine the daily return of the benchmark index is gathered to compute the …
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Information Ratio (IR) - Definition & Formula | How is the ...
The Information ratio acts as a measure of a fund manager’s performance. Fund managers, therefore, use IR or appraisal ratio, to determine their service charges. The better a portfolio manager’s ratio, the higher is their service charge.
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Information Ratio - Breaking Down Finance
Information ratio. The information ratio (IR), sometimes also called the appraisal ratio, is one of the most important ratios used in active management and finance. The ratio is very similar to the Sharpe ratio (SR), and both are often mixed up.
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What is a good information ratio?
Generally speaking, an information ratio in the 0.40-0.60 range is considered quite good. Information ratios of 1.00 for long periods of time are rare. Typical values for information ratios vary by asset class.
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What is Information Ratio (IR)?
What Is the Information Ratio - IR? The information ratio (IR) is a measurement of portfolio returns beyond the returns of a benchmark, usually an index, compared to the volatility of those returns. The benchmark used is typically an index that represents the market or a particular sector or industry.
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How does the Sharpe ratio differ from the information ratio?
Both ratios determine the risk-adjusted returns of a security or portfolio. However, the information ratio measures the risk-adjusted returns relative to a certain benchmark while the Sharpe ratio compares the risk-adjusted returns to the risk-free rate.
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