Before revision:  This paper proposes  the Generalized Information Ratio (GIR) to evaluate the performance of active portfolios under misspecified models . Motivated by the theoretical link between abnormal returns and residual covariance matrix, GIR is derived as alphas scaled by the inverse square root of the residual covariance matrix (GIR = \Sigma ^(-1/2) \alpha ).
After revision:  This paper proposes the Generalized Information Ratio (GIR) to evaluate the performance of active portfolios under misspecified models . Motivated by the theoretical link between abnormal returns and residual covariance matrix, GIR is derived as alphas scaled by the inverse square root of the residual covariance matrix \Sigma ^(-1/2) \alpha ).