I feel like the below statemetn is contradicting… i don’t understand it.
"unlike leve of aggressiveness, time horizon does impact a managers information ratio. the informationr ratio will increase with the square root of time . this implies that a quarterly IR will be half as large as the annual information ratio.
4^2 = 2. why are they saying will be half as large.
"Increasing the time horizon will increase your annualized IR ratio’’
Sounds weird to me.
If you increase the forecast horizon, from quarterly to semi-annually. Then the total number of bets each year would decrease from 4 to 2 . Which means your BR will be lowered by half and IR be lowered by square root of 2?
This may be an issue of how I interpret the word “time horizon”
But I think understanding the bottom line idea is sufficient:
You can improve your IR by making more bets (increasing BR) using the same level of skill for each bet (same IC, meaning not losing your forecast accuracy as you make more forecasts!!!)
Please tell me if I’m confusing you Perhaps we should wait for s2000magician to clarify these terms.