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Skill, breadth and the information ratio · Part 3 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.
Back to the 500-stock strategy. The bets within each month share an average pairwise correlation of 0.01. What information ratio does the law now 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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