hard · FRM Part 2 Risk & Investment Management
According to the Fundamental Law of Active Management, a manager with an Information Coefficient (IC) of 0.05 and a breadth of 100 independent bets per year has an expected Information Ratio (IR) of 0.50.
If the manager starts making 400 bets per year, but these bets are perfectly correlated in pairs, what is the new expected IR?
- 0.50
- 0.71
- 1.00
- 0.707
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