There are both ex ante expected and ex post observed information ratios.
2.
Top-quartile investment managers typically achieve annualized information ratios of about one-half.
3.
A better measure of the alpha produced by the manager is the Geometric Information Ratio.
4.
The information ratio is often annualized.
5.
One of the main criticisms of the Information Ratio is that it considers arithmetic returns and ignores leverage.
6.
This can lead to the Information Ratio calculated for a manager being negative when the manager produces alpha to the benchmark and vice versa.
7.
The information ratio is a more general form of the Sharpe ratio in which the risk-free asset is replaced by a benchmark portfolio.
8.
The higher the information ratio, the higher the active return of the portfolio, given the amount of risk taken, and the better the manager.
9.
Generally, the information ratio compares the returns of the manager's portfolio with those of a benchmark such as the yield on three-month Treasury bills or an equity index such as the S & P 500.
10.
The goal of the V2 Ratio is to improve on existing and popular measures of risk-adjusted return, such as the Sharpe ratio, Information ratio or Sterling ratio by taking into account the psychological impact of investment performances.
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