Learning outcomes: Differentiate between the time-weighted and dollar-weighted returns of a portfolio and describe their appropriate uses. Describe risk-adjusted performance measures, such as Sharpe’s measure, Treynor’s measure, Jensen’s measure (Jensen’s alpha), and the information ratio, and...
Learning outcomes: Describe Grinold’s fundamental law of active management, including its assumptions and limitations, and calculate the information ratio using this law. Apply a factor regression to construct a benchmark with multiple factors, measure a portfolio’s sensitivity to those factors...
Learning objectives: Describe and evaluate the low-risk anomaly of asset returns. Define and calculate alpha, tracking error, the information ratio, and the Sharpe ratio. Explain the impact of benchmark choice on alpha and describe characteristics of an effective benchmark to measure alpha...
Learning objectives: Calculate, compare and interpret the following performance measures: the Sharpe performance index, the Treynor performance index, the Jensen performance index, the tracking error, information ratio, and Sortino ratio.
Questions:
20.9.1. The riskfree rate is 3.0% and the...
I'm confused on which Information Ratio to use. It appears that there are two equations. This depends on active or residual?
= Alpha / Tracking Error
= Rp - Rb / Tracking Error
I will post here selected observations made (either by myself or subscribers/members) about the newest material. As most already know, the entire Part 1 FRM has experienced a big change, but the change can be deceiving in appearance because as I replied over on the reddit FRM board, with respect...
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...
Learning objectives: Describe Grinold’s fundamental law of active management, including its assumptions and limitations, and calculate the information ratio using this law. Apply a factor regression to construct a benchmark with multiple factors, measure a portfolio’s sensitivity to those...
Learning objectives: Describe and evaluate the low-risk anomaly of asset returns. Define and calculate alpha, tracking error, the information ratio, and the Sharpe ratio. Explain the impact of benchmark choice on alpha, and describe characteristics of an effective benchmark to measure alpha...
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