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Tracking Error: Ex Ante Versus Ex Post Measures

  • Stephen E. Satchell
  • Soosung Hwang
Chapter
  • 2.1k Downloads

Abstract

Portfolio performance is usually evaluated against a prespecified benchmark portfolio. One most frequently used measure is tracking error (TE), sometimes defined as differences between portfolio returns and the benchmark portfolio returns. TE is simple and easy to calculate as well as a powerful tool in structuring and managing index funds. Two common sources of tracking errors come from the attempts to outperform the benchmark and the passive portfolio replication of the benchmark by a sampled portfolio.

Keywords

Track Error Fund Manager Efficient Frontier Portfolio Management Portfolio Return 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© The Editor(s) 2016

Authors and Affiliations

  • Stephen E. Satchell
    • 1
    • 2
    • 3
  • Soosung Hwang
    • 4
    • 5
  1. 1.Faculty of Economics and PoliticsCambridgeUK
  2. 2.Trinity CollegeUK
  3. 3.Faculty of Economics and PoliticsCambridge UniversityUK
  4. 4.Faculty of FinanceCity University Business SchoolLondonUK
  5. 5.Department of Applied EconomicsCambridge UniversityUK

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