Information Ratio

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Active return relative to a benchmark divided by tracking error. The hallmark metric for benchmarked managers.

Details

• category: Risk-Adjusted Performance
• formula: IR = (R_p - R_b) / TE
• formula latex: \text{IR} = \dfrac{R_p - R_b}{\text{TE}}
• related terms: information-ratio, tracking-error, alpha

Formula

IR = (R_p - R_b) / TE