Suppose that a QEPM department hires a new quantitative equity portfolio manager to manage one of its portfolios. Suppose that the portfolio managers benchmark is the S&P 500, with a Sharpe ratio of 0.25. After 1 year, the manager has an information ratio (IR) of 0.5. Should the head of the department award him a bonus based on this IR?

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The Information Ratio IR measures the excess return of a portfolio relative to a benchmark per unit ... View the full answer