Definitions for

**"information ratio"****Related Terms:**Sharpe ratio, Sortino ratio, Tracking error, Alpha, Risk-adjusted return, Risk adjusted return, Active risk, Alpha coefficient, Absolute return, Efficient frontier, Performance, Efficient portfolio, R-squared, Benchmark portfolio, Relative volatility, Expected return, Compound annual return, Profitability ratios, Raroc, Risk adjusted return on capital, Benchmark index, Required rate of return, Roi, Average annual return, Optimal portfolio, Average rate of return, Excess return, Return on investment, Return-on-investment, Annualized return, Underperform, Hurdle rate, Capital asset pricing model, Investment risk, Turnover ratio, Weighting, Capital market line, Modern portfolio theory, Opportunity cost of capital, Total risk, Morningstar, Time-weighted rate of return, Passive management, Benchmark, Rate of return, Real return, Accounting rate of return, Beta coefficient, Indexing

In investing terminology, the ratio of expected return to risk, as measured...

A ratio that measures the added return per unit of added risk.

Information Ratio is excess return relative to a benchmark divided by active risk (also known as, excess risk relative to the benchmark). Information ratio is a good measure of manager effectiveness because it incorporates the level of risk a manager takes to obtain a given excess return. For example, in a situation where two managers had identical excess returns, an investor would prefer the manager that took less risk to accomplish that level of returns and that manager would have a higher information ratio.

A measure of the efficiency of converting risk into return. Specifically, it is the amount of additional return above that of the chosen benchmark for each unit of risk (defined by the standard deviation of relative returns) with all figures measured in percentages per annum. For example, a manager able to produce a 1% outperformance per annum of a benchmark with a risk of 2% per annum will have an information ratio of 0.5.

Ratio used to gauge active management. Expressed as the ratio between active return and active risk (tracking error). A positive information ratio means that active management generated an excess return per risk unit relative to the benchmark, while a negative one indicates that a lower return was achieved.

A measure of risk-adjusted return. It measures the return of the fund over and above the return on an appropriate benchmark portfolio (for example the S&P 500, Russell 2000, etc.) per unit of excess risk taken (defined as the standard deviation of the return of the fund relative to the return on the index). The purpose of the measure is to determine whether the fund's manager has been able to consistently add value over the benchmark portfolio. The larger the information ratio, the more likely the manager's relative out-performance is the result of true skill (as opposed to luck) and therefore reasonably can be expected to be repeated.

In investing terminology, the ratio of expected return to risk. Usually, this statistical technique is used to measure a manager's performance against a benchmark. This measure explicitly relates the degree by which an Investment has beaten the Benchmark to the consistency by which the Investment has beaten the Benchmark.

Measures the success of the investment decisions made by the Portfolio Manager that differ from the market index There are no glossary terms available for this letter of the alphabet. There are no glossary terms available for this letter of the alphabet.

The ratio of annualized residual return to residual risk. A measurement for active management.

A measure of the consistency of excess return. This value is determined by taking the annualized excess return over a benchmark (style benchmark by default) and dividing it by the standard deviation of excess return.

This statistic measures how much a fundâ€(tm)s out-performance may be attributed to manager skill as oppose to market movement. A high Information Ratio infers more manager skill than a low value would suggest. Information ratio is calculated by taking the difference between the average annualised return of a fund and the average annualised return of its benchmark and then dividing this value by the requisite tracking error of two components.

A measurement of the relative performance of the fund in relation to its benchmark adjusted by the risk of tracking error. It specifically focuses on the manager's activities, as opposed to the portion of the risk and return caused by the mix of asset classes and styles.

This is the ratio of the excess annualized return against the tracking error. The higher the ratio, the better, as it reflects the extent to which the fund has outperformed the benchmark.

The information ratio is equal to the relative y-o-y performance of the fund compared to its benchmark on the y-o-y tracking error. It measures the tendency of the fund to outperform (positive ratio) or under-perform (negative ratio) its benchmark for a risk structure equal to that of its index. The higher the ratio, the better since it reflects to what extent the risk taken by the manager compared to his benchmark has been rewarded.

The Information Ratio is the active premium divided by the tracking error. This measure explicitly relates the degree by which an investment has beaten a benchmark to the consistency by which the investment has beaten that same benchmark.

A portfolio management performance measure against risk and return relative to a benchmark.

The extra return from a portfolio versus the benchmark relative to the extra risk.

The information ratio evaluates the return a manager adds over and above a relative index, given the risk that manager assumes.

A statistical ratio of a variable against a standard deviation. In relation to managed investments, information ratios are most often used to measure a manager’s performance in terms of both risk and return relative to a benchmark or other measure (eg. the inflation rate).

The Information Ratio concept is one measure of volatility-adjusted return and is used in the analysis of performance of mutual funds, hedge funds, etc. Specifically, the information ratio is defined as excess return divided by tracking error. Excess return is the amount of performance over or under a given benchmark index.

Information services Informational efficiency