You want to evaluate three mutual funds using the information ratio measure for performance evaluation. The average risk-free return during the sample period is 3% p.a., and the average return on the market portfolio is 12% p.a. The average return, beta and residual standard deviation for the three funds are given below:

 The fund with the highest information ratio measure is?

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Fund Annual Average Return A 16% B 19% C 22% Beta 0.65 0.85 1.10 Residual standard deviation 5.20% 6.40% 8.60% Fund Annual Average Return A 16% B 19% C 22% Beta 0.65 0.85 1.10 Residual standard deviation 5.20% 6.40% 8.60%

Answer rating: 100% (QA)

To determine the fund with the highest information ratio measure we need to calculate the informatio... View the full answer