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YouTube T1-11 Information Ratio

Nicole Seaman

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The information ratio is active (or residual) return divided by active (or residual) risk. Active risk is also called tracking error, so the "active information ratio" is given by (active return)/(tracking error). Alternatively, a more technical approach is to use alpha (aka, residual risk) so that the "residual information ratio" is given by alpha/(residual risk).

David's XLS: http://trtl.bz/yt-1106-information-ratios


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