The question asks to choose the candidate with greatest skill at achieving active returns and in the answer the choice is based on the highest IR. However, in the text it is stated that IC is the measure of the manager’s skill (which would lead to a different answer). Can someone please clarify?
Don’t confuse IC with IR.
The IR is a measure of an investment manager’s skill, comparing a manager’s excess returns to the amount of (active) risk taken.
The information coefficient (IC) is a measure used to evaluate the skill (of) an investment analyst or active portfolio manager.
An IC of +1.0 indicates a perfect prediction of actual returns, while an IC of 0.0 indicates no linear relationship.
An IC of -1.0 indicates that the analyst always fails at making a correct prediction.
Source: https://www.investopedia.com/terms/i/information-coefficient.asp
That makes sense now. Thank you