InformationRatio = ActivePremium/TrackingError
The Active Premium divided by the Tracking Error.
InformationRatio(Ra, Rb, scale = NA)
Ra |
an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns |
Rb |
return vector of the benchmark asset |
scale |
number of periods in a year (daily scale = 252, monthly scale = 12, quarterly scale = 4) |
InformationRatio = ActivePremium/TrackingError
This relates the degree to which an investment has beaten the benchmark to the consistency with which the investment has beaten the benchmark.
William Sharpe now recommends InformationRatio preferentially
to the original SharpeRatio.
Peter Carl
Sharpe, W.F. The Sharpe Ratio,Journal of Portfolio Management,Fall 1994, 49-58.
data(managers) InformationRatio(managers[,"HAM1",drop=FALSE], managers[, "SP500 TR", drop=FALSE]) InformationRatio(managers[,1:6], managers[,8,drop=FALSE]) InformationRatio(managers[,1:6], managers[,8:7])
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