Tom

The standard deviation of differential return is tracting error.
When you see this my guess the numerator is excess return - in which case the measure is normally called information ratio.

Basically instead of absolute return compared to variability of absolute return you are comparing excess return with variabilty of excess return.

Which one you favour will depend on your preferences - but Sharpe ratio is regarded as a better measure of absolute return strategies hedge funds etc whilst information ratio is more commonly used by benchmark driven institutional managers

Both are correct, and both are in common usage and both are highly criticised - there are many alternatives

Best regards

Carl

Best

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