medium · FRM Part 2 Risk & Investment Management
A risk manager is using the Fundamental Law of Active Management to evaluate a portfolio. The Information Coefficient (IC) is 0.05, and the manager makes 100 independent investment decisions per year.
If the manager effectively doubles the breadth (BR) of the strategy while maintaining the same IC, by what factor does the Information Ratio (IR) increase?
- 1.414
- 2.000
- 1.000
- 0.500
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