Application of the Information Ratio in a Rolling Style Analysis Methodology to Test the Effects on the Lognormal Returns of a 3 – Month OMX Copenhagen 20 Cap Index Option Contract

This article examines the application of the information ratio in a rolling style analysis methodology to test the effects on the lognormal returns of a 3 – month OMX Copenhagen 20 Cap index option contract. The information ratio is calculated as the ratio of the excess return divided by the tracking error. The excess return is obtained as the difference of the monthly returns and the appropriate benchmark index. High values of the information ratio are an indication of a skillful manager that adds value in terms of better performance persistence of the index option contract. In contrast, low values of the information ratio are an indication of a manager that shows low performance and no value in terms of investment ability