CFA Practice Question

There are 136 practice questions for this study session.

CFA Practice Question

A manager makes a quarterly forecast of the market, which consists of 10,000 stocks. Assume their active returns are uncorrelated. The information coefficient for the market forecast is 0.2. The information ratio for the market timing is ______.
A. 0.4
B. 20
C. 40
Explanation: BR1/2 x IC = 41/2 x 0.2 = 0.4
Note that the manager is not making an individual forecast for each stock.

User Contributed Comments 3

User Comment
sunday128 What is BR?
maxsouto Breadth, but I am not sure how they got that "4"
JNW1980 The 4 is the number of quarters in a year. Breadth in this case is one decision for each quarter * 4 quarters / year = 4.
You need to log in first to add your comment.