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Skill, breadth and the information ratio · Part 1 of 3
A stock-selection signal has a cross-sectional information coefficient (IC) of 0.02 and is rebalanced monthly across 500 stocks. Use the fundamental law of active management.
If the bets are independent, what annual information ratio does the law predict, to two decimal places?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
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