Final Answer:
The statement "Suppose you manage an equity fund with the following securities. Use the following data to calculate the information ratio of each stock" is b) False. (option b)
Step-by-step explanation:
The information ratio is a measure of a portfolio manager's ability to generate excess returns relative to a benchmark per unit of active risk taken. To calculate the information ratio for each stock in the equity fund, the following steps are typically taken:
Calculate Excess Returns:
Subtract the benchmark return from the actual return for each stock to obtain excess returns.
Calculate Active Risk:
Determine the standard deviation of the excess returns, representing the active risk.
Compute Information Ratio:
Divide the excess return by the active risk to obtain the information ratio.
The information ratio is a valuable metric for evaluating the performance of equity funds and individual stocks within those funds. In the context of the given question, the statement "b) False" suggests that the process of calculating information ratios is not accurately described or may involve additional steps.(option b)