Contrast active strategies such as security selection and market timing, and use active management's fundamental law to assess shifts in strategy

A market timer makes a few calls a year on broad asset classes, so breadth is small and a high information coefficient is needed. For binary calls, right or wrong each time, the coefficient is IC = 2 × proportion correct − 1, so a timer right 60% of the time has an IC of 0.20. A stock picker covering a large universe makes many independent bets, so a modest IC can still produce a good information ratio. To evaluate a strategy change, ask what it does to each term: relaxing a long-only constraint raises the transfer coefficient and the IR in proportion; adding securities or rebalancing more often raises breadth, but only if the new bets are genuinely independent. The trap is to compare strategies on expected active return alone rather than on the IR each delivers.