The Information Ratio (IR) is calculated by dividing relative returns (Active Returns) by relative risk (Active Risk). The numerator, denominator and the ratio provides information regarding the risk and performance of a portfolio.

Which of the following statement regarding fund portfolio risk or performance does not use the information from the numerator, denominator or the Information Ratio

A positive Active Returns suggests that the likelihood of similar portfolio performance in future

The out or under performance of a portfolio against its benchmark can be calculated by subtracting benchmark's weighted returns from the portfolio.

Active Returns are composed of Market Timing and Stock Selection returns. However, the Information Ratio does not allow for the decomposition of Active Returns into the two components.

The deviation of capital allocation (Active weights) to each asset in the portfolio from its benchmark provides the level of relative risk taken by the portfolio manager.

A portfolio will not be able to generate Active Returns without Active Risk.

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