Wat is Information ratio?

Example 3.10 (Sixteen years)

A long-only manager with a genuinely good $\mathrm{IR}$ of 0.5 needs 16 years before its record is distinguishable from luck at the usual threshold; with $\mathrm{IR} = 0.25$, 64 years. A market-making strategy with a daily Sharpe ratio equivalent to $\mathrm{IR} = 8$ needs about three weeks. This one line explains why long-horizon managers are hired on stories and fired on noise, while short-horizon firms can be run on statistics (Figure 3.2).