Which is better Sharpe ratio vs information ratio?

Says Vidya Bala, Head, Mutual Fund Research, FundsIndia, “The Sharpe Ratio simply tells an investor how much he or she was compensated for taking risks, while the Information Ratio tells the investor the rewards the fund manager generated by deviating from the benchmark.” “A high Information Ratio signals a more …

What does the information ratio tell us?

The information ratio identifies how much a fund has exceeded a benchmark. Higher information ratios indicate a desired level of consistency, whereas low information ratios indicate the opposite.

What is the information ratio of a fund?

Information ratio measures the fund’s performance relative to its benchmark and adjusts it for market volatility. If the ratio is between 0.61 and 1, then it is a great investment. Information ratio is extremely useful in comparing a group of funds with similar management styles.

Is information ratio the same as Alpha?

In other words, we strip out the risk free rate from the earned returns, and divide that by the total standard deviation of the returns. The Information Ratio: The Information Ratio, on the other hand, is the ratio of the alpha component of total returns to the standard deviation of these excess alpha returns.

Is a higher information ratio better?

What is a Good Number? The higher the information ratio, the better. If the information ratio is less than zero, it means the active manager failed on the first objective of outperforming the benchmark.

Do you want high or low information ratio?

What is a good downside capture ratio?

An upside capture ratio over 100 indicates a fund has generally outperformed the benchmark during periods of positive returns for the benchmark. Meanwhile, a downside capture ratio of less than 100 indicates that a fund has lost less than its benchmark in periods when the benchmark has been in the red.

What is upside/downside ratio?

The upside/downside ratio is a variation on the advance-decline ratio (ADR), which compares the number, and not the trading volume, of stocks that closed higher against the number of stocks that closed lower than their previous day’s closing prices.

What is the purpose of finding the Sharpe index and the information ratio?

Both ratios determine the risk-adjusted returns of a security or portfolio. However, the information ratio measures the risk-adjusted returns relative to a certain benchmark while the Sharpe ratio compares the risk-adjusted returns to the risk-free rate.