What is Information Ratio?
Information Ratio A performance measure comparing the active return of a portfolio to the tracking error, showing how efficiently a manager generates excess return relative to benchmark risk.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Information Ratio” Used in Practice?
A higher Information Ratio suggests the manager consistently adds value by outperforming the benchmark relative to the level of active risk taken.
Certification Exam Relevance
Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Information Ratio?
A performance measure comparing the active return of a portfolio to the tracking error, showing how efficiently a manager generates excess return relative to benchmark risk.
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