Mastering the Information Ratio & Tracking Error in Excel

Join Ryan O'Connell, CFA, FRM, on a comprehensive journey through mastering the Information Ratio and Tracking Error using Excel, vital metrics for anyone involved in finance and investments. Discover the significance of the Information Ratio, learn how to download stock return data from Yahoo Finance, and dive into the calculation of daily and excess returns over benchmarks. Enhance your portfolio management skills by calculating annual returns, portfolio tracking error, and the Information Ratio, all within Excel. Whether you're managing ETFs, funds, or personal investments, this video is your ultimate guide to optimizing investment performance with precision and confidence.
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Chapters:
0:00 - Why Information Ratio Matters
1:43 - Basic Description of Our ETFs and Funds
3:01 - Download Stock Return Data from Yahoo Finance
3:53 - Calculate Daily Returns
4:36 - Calculate Excess Returns Over Benchmark
5:34 - Calculate Annual Return
7:56 - Calculate Portfolio Tracking Error
9:54 - Calculate Information Ratio in Excel
11:10 - 20% Off CFA & FRM Study Packages
*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

[@RyanOConnellCFA]

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🎓 Tutor With Me: 1-On-1 Video Call Sessions Available
► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/
💾 Download Free Excel File:
► Download the file created in this video free here: ryanoconnellfinance.com/product/information-ratio-tracking-error-excel-workbook/

[@joeaoun6321]

Thanks for a very clear explanation. Your videos are great.

[@RyanOConnellCFA]

You are welcome! I appreciate the kind feedback

[@user-ov2wk4oo1n]

If I see a new video from Ryan, I immediately like it 👍

[@RyanOConnellCFA]

Thank you for that!

[@baopham7347]

hi, can I ask for your help with the difference between annual and annualized returns?

[@user-yh8hp3kn1y]

Great video as always! thank you for this gems.
I have a question: if I take the average of the Portfolio Return - Benchmark Return column, shouldn't that tell me whether the fund has outperformed the index? Because if the average is >0, it means that the fund has outperformed the index most of the time. I tried to calculate this on your spreadsheet but it comes out positive for both funds with my stupor😅. By my reasoning it should be negative for ARKK. Can you please explain why?

[@shreyaagarwal7695]

Hey Ryan, can u pls explain how are u calculating 3381 days I mean up to how many yrs have u taken the data

[@RyanOConnellCFA]

I'm finding the number of days in the whole period so that we can figure out how many years there are and scale the annual return appropriately to the number of years!

[@sayednab]

Hey Ryan, have you done video on stresstest on loans? :)

[@RyanOConnellCFA]

Hello, I have not yet but I'm looking to make a stress testing video in the future

[@sayednab]

Nice. Looking forward.

[@prateekmahajan5683]

Hey Ryan,
Just kne doubt information ratio to division of cumulative excess return and tracking error, so the result would have percentage as unit or will it be without percentage as we dividing 2 percentage values.

[@RyanOConnellCFA]

Hello, If I hadn't multiplied by 100 at the end it would have been quoted as a percentage value!

[@m-1917]

why not log returns? I’ve learned from you their importance and now you don’t use them 😢