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Basic Question 8 of 13
If the active weights in a managed portfolio are all doubled, ______
II. the expected active risk would be doubled.
III. the information ratio would be doubled.
I. the expected active return would be doubled.
II. the expected active risk would be doubled.
III. the information ratio would be doubled.
User Contributed Comments 3
| User | Comment |
|---|---|
| deguchiusa | Please explain why expected active risk will be doubled. |
| tianhes | I am guessing it is because the combined weights will exceed 100%, and thus the investor will use leverage. Therefore expected active risk will double? |
| b25331 | If all active weights are doubled, the expected active return would be doubled as well. This goes into the numerator. If active weights are doubled, so is active risk. This goes into the denominator. This leave the IR ratio unchanged. What happens outside the portfolio with respect to e.g. leverage does not matter in this case |
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Learning Outcome Statements
calculate and interpret the information ratio (ex post and ex ante) and contrast it to the Sharpe ratio;
CFA® 2025 Level II Curriculum, Volume 6, Module 38.