CISI Investment Advice Diploma Exam

What is the 'information ratio' used to assess in investment management?

The ratio of a manager's communication quality to their return The consistency and magnitude of a manager's outperformance relative to a benchmark, calculated as active return divided by tracking error The ratio of a fund's information technology costs to its AUM The ratio of fundamental analysis to technical analysis in a manager's process

Correct Answer:

The consistency and magnitude of a manager's outperformance relative to a benchmark, calculated as active return divided by tracking error

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