You want to evaluate three mutual funds using the information ratio measure for performance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 19%. The average returns, residual standard deviations, and betas for the three funds are given below.
The fund with the highest information ratio measure is
Definitions:
Hedonic Treadmill
The theory suggesting that people consistently return to a relatively stable level of happiness despite major positive or negative events or life changes.
Neoclassical Assumptions
The foundational premises of neoclassical economics, such as rational behavior, market equilibrium, and utility maximization.
Behavioral Economists
Specialists examining the effects of psychological, cognitive, emotional, cultural, and social components on the economic decision-making of individuals and institutions.
Nudges
Subtle policy shifts or design changes that steer people's behavior in predictable ways without forbidding any options or significantly changing economic incentives.
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