The Central Paradox of Active Management: Maximizing the Information Ratio Is Counterproductive
揭示了信息比率作为主动管理绩效指标的固有偏差，证明最大化信息比率反而会加剧这种偏差，对基金经理和投资者有重要警示。
The use of “information ratios” for benchmark relative (active) returns seems like a small step from the use of the Sharpe ratio for absolute returns. However, something very important got overlooked in that extension. While it is possible (even likely) that all risky assets will outperform the risk-free rate over a sufficiently long horizon, it is impossible for all active managers to outperform sensible benchmarks, even though all active managers (and their investors) must believe they will outperform to rationally pursue active management. Obviously, a material portion of active investors must underperform benchmarks, even though none expects to do so. This failure to accept arithmetic reality is known as the “Central Paradox of Active Management.” This inherent “wrongness” is not reflected in the way an information ratio (IR) is calculated as a simple coefficient of variation, leaving conventional IR values upward biased as performance measures. In this article, the framing of the algebra shows that the degree of bias increases with IR in a nonlinear fashion, so the conventional view that portfolio managers should seek to maximize their information ratio is demonstrably counterproductive.