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Abstract

There are many ways in which investor can measure the performance of portfolio. Different theorists have proposed many different models for this purpose. The Sharpe Ratio given by Sharpe (1964) and its close analogical concept - the Information Ratio, are one of the most common measures of portfolio performance. Active investing requires the portfolio managers to beat the stock market’s average returns and take advantage of short-term price fluctuations. The active return of the portfolio should perform as well as the benchmark or, better so, outperform the benchmark. The simplicity of these two ratios leads them to their greatest weakness. Both the ratios are useful for evaluating the portfolio but only in limited situation. They are not applicable in asymmetric situations. In this paper, an effort has been made to analyse the correlation between the two ratios briefly but still major research work is required to give more concise relationship between these tools and their measuring of performance.