PerformanceAnalytics (version 0.9.5)

InformationRatio: InformationRatio = ActivePremium/TrackingError

Description

The Active Premium divided by the Tracking Error.

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.

Usage

InformationRatio(Ra, Rb, scale = 12)

Arguments

Ra

a 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)

Value

• information ratio (number)

Details

William Sharpe now recommends InformationRatio preferentially to the original SharpeRatio.

References

Sharpe, W.F. The Sharpe Ratio,Journal of Portfolio Management,Fall 1994, 49-58.

See Also

TrackingError ActivePremium SharpeRatio

Examples

data(edhec)
edhec.length = dim(edhec)[1]
start = rownames(edhec[1,])
start
end = rownames(edhec[edhec.length,])
sp500 = download.SP500PriceReturns(start="1996-12-31",end=end)
InformationRatio(edhec[,13],sp500)