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Information Ratio Formula

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Information Ratio is a measure of the excess return of an investment relative to a benchmark, adjusted for the volatility of those excess returns. Check FAQs

R Info = \frac{R p - BR}{TE}

R_Info - Information Ratio?R _p - Portfolio Return?BR - Benchmark Return?TE - Tracking Error?

Information Ratio Example

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Here is how the Information Ratio equation looks like with Values.

Here is how the Information Ratio equation looks like with Units.

Here is how the Information Ratio equation looks like.

0.25 = \frac{5 - 3}{8}

0.25 = \frac{5 - 3}{8}

0.25 = \frac{5 - 3}{8}

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Information Ratio Solution

Follow our step by step solution on how to calculate Information Ratio?

FIRST Step Consider the formula

R Info = \frac{R p - BR}{TE}

Next Step Substitute values of Variables

∴

R Info = \frac{5 - 3}{8}

Next Step Prepare to Evaluate

∴

R Info = \frac{5 - 3}{8}

LAST Step Evaluate

∴

R Info = 0.25

Information Ratio Formula Elements

Variables

Information Ratio

Information Ratio is a measure of the excess return of an investment relative to a benchmark, adjusted for the volatility of those excess returns.

Symbol: R_Info

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Information Ratio

Portfolio Return

Portfolio Return refers to the gain or loss realized by an investment portfolio containing several types of investments.

Symbol: R _p

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Portfolio Return

Benchmark Return

Benchmark Return refers to the return achieved by a designated benchmark index over a specific period of time.

Symbol: BR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Benchmark Return

Tracking Error

Tracking Error is a measure of how closely a portfolio follows the index it is benchmarked against.

Symbol: TE

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Tracking Error

Other formulas in Important Formulas of Investment category

Go Certificate of Deposit

CD = P0 Deposit \cdot {(1 + (\frac{r Annual}{n c}))}^{n c \cdot n t}

Go Compound Interest

FV = A \cdot {(1 + (\frac{i}{n}))}^{n \cdot T}

Go Capital Gains Yield

CGY = \frac{P c - P0}{P0}

Go Risk Premium

RP = ROI - Rf return

How to Evaluate Information Ratio?

Information Ratio evaluator uses Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error to evaluate the Information Ratio, The Information Ratio formula is defined as a measure of the excess return of a portfolio relative to a benchmark, adjusted for the volatility of those excess returns. Information Ratio is denoted by R_Info symbol.

How to evaluate Information Ratio using this online evaluator? To use this online evaluator for Information Ratio, enter Portfolio Return (R _p), Benchmark Return (BR) & Tracking Error (TE) and hit the calculate button.

FAQs on Information Ratio

What is the formula to find Information Ratio?

The formula of Information Ratio is expressed as Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error. Here is an example- 0.25 = (5-3)/8.

How to calculate Information Ratio?

With Portfolio Return (R _p), Benchmark Return (BR) & Tracking Error (TE) we can find Information Ratio using the formula - Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error.

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Information Ratio Formula

Information Ratio Example

Information Ratio Solution

Information Ratio Formula Elements

Other formulas in Important Formulas of Investment category

How to Evaluate Information Ratio?

FAQs on Information Ratio

Variable Name