How Useful is the Information Ratio to Evaluate the Performance of Portfolio Managers?

How Useful is the Information Ratio to Evaluate the Performance of Portfolio Managers?

Table of Contents

List of Figures

List of Tables

List of Abbreviations

1 Introduction

1.1 Motivation and Objective

1.2 Course of the Investigation

2 Theoretical Overview

2.1 Methods of Fund Performance Measurement

2.1.1 Characteristics of a Reliable Performance Measure

2.1.2 The Treynor Ratio

2.1.3 The Sharpe Ratio

2.1.4 Jensen’s Alpha

2.1.5 The Sortino Ratio

2.1.6 The M² Measure

2.1.7 The Omega Measure

2.2 The Information Ratio

2.3 Sources of Active Returns: How to Beat the Benchmark

2.4 Agency Problems Related to Performance Measures

3 Data Description and Sources

3.1 Mutual Fund Selection

3.2 Benchmark Selection

3.3 Descriptive Statistics

4 Empirical Study on Selected Performance Measures

4.1 Is the Information Ratio a Reliable Measure of Performance?

4.2 The Information Ratio Versus Other Measures

4.3 The Art of Selecting the Benchmark

4.4 Does Data Frequency Matter?

4.5 Other Influences on Performance Measures

4.6 Performance Persistence: Outperformance by Luck or Skill?

4.7 Summary of Empirical Results

5 A Practical View on Performance Measurement

6 Conclusion

List of References

Appendix