Information Ratio (IR)

According text, the ranking of IRs is : Semi-active > Active > Passive. But both active return & risk are near 0. Then IR = 0/0, how can we define IR = 0/0 ? it is the lowest or highest ?

0/0 is not the same as near zero/near zero.

The data in exhibit 3, P202, may assume the transction cost is 0, otherwise, the active return for indexing might be slightly less than 0.

In the mock exam, Goldsboro’s case, Exhibit 3, the IR for GB-STI-3 is undefined: 0/0. :smiley: