While absolute risk and return is important (e.g., standard deviation, Sharpe), performance versus a benchmark can offer an additional lens to assess a model.

Therefore, it would be helpful to view tracking error (i.e., standard deviation of excess returns versus a benchmark) and Information Ratio (i.e., excess returns divided by tracking error).

A benchmark is one measure of opportunity cost, and investors may balk if a strategy either underperforms a benchmark for an extended period of time, or does not consistently outperform its benchmark.
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Requested by: quadz42
On date: 04/07/15
Category: Portfolio