Information Ratio Quant Interview Guide
Information ratio quant interview guide for active return, tracking error, benchmarks, Sharpe comparison, examples, and limitations.
Candidates discussing benchmark-relative performance.
Information ratio is benchmark-relative
Information ratio compares active return to tracking error. It asks how much return a strategy earns relative to its benchmark per unit of active risk.
Benchmark choice drives meaning
The same portfolio can have different information ratios against different benchmarks. Always state the benchmark before interpreting active return or tracking error.
Concrete example
A portfolio that beats an index by 2 percent with low tracking error may have a higher information ratio than one that beats by more but takes much larger active bets.
Compare with Sharpe carefully
Sharpe focuses on total excess return versus total volatility. Information ratio focuses on benchmark-relative return versus benchmark-relative volatility.
Common mistakes
Candidates often ignore active risk and discuss only excess return. The interview answer should say what benchmark is being beaten and how much active risk was used.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.