InformationRatio {JFE}

InformationRatio = ActivePremium/TrackingError

Description

The Active Premium divided by the Tracking Error.

Usage

InformationRatio(Ra, Rb, scale = NA)

Arguments

Ra

an xts, 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)

Details

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.

Note

William Sharpe now recommends InformationRatio preferentially to the original SharpeRatio.

Author(s)

Ho Tsung-wu <[e-mail]>, College of Management, National Taiwan Normal University.

References

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

See Also

TrackingError
ActivePremium
SharpeRatio

Examples

  data(assetReturns)
	Ra=assetReturns[, -29]
	Rb=assetReturns[,29] #DJI

  InformationRatio(Ra, Rb)