Information ratio
The information ratio is a measure for evaluating a mutual fund and describes the excess return relative to the tracking error (English tracking error ). It is calculated by dividing the fund return (expressed in alpha ) by the fund risk (expressed in replication error). The alpha measures the excess return ( outperformance ) of the fund over its reference index (benchmark). The replication error indicates the volatility of the deviations between the fund's return and the reference index and is therefore a measure of the fund's risk. The higher an information ratio, the more profitable an investment strategy deviating from the index is for an investor.
Footnotes
- ↑ Explanations of the fund key figures (PDF; 36 kB)