Calculation Of Ex Ante Tracking Error
Contents |
it indicates how closely a portfolio follows the index to which it is benchmarked. The best measure is ex ante tracking error formula the standard deviation of the difference between the portfolio and index ex ante tracking error definition returns. Many portfolios are managed to a benchmark, typically an index. Some portfolios are expected to replicate,
Ex Ante Vs Ex Post Tracking Error
before trading and other costs, the returns of an index exactly (e.g., an index fund), while others are expected to 'actively manage' the portfolio by deviating slightly from
Ex Ante Tracking Error Calculation Excel
the index in order to generate active returns. Tracking error is a measure of the deviation from the benchmark; the aforementioned index fund would have a tracking error close to zero, while an actively managed portfolio would normally have a higher tracking error. Thus the tracking error does not include any risk (return) that is merely a ex ante tracking error models function of the market's movement. In addition to risk (return) from specific stock selection or industry and factor "bets," it can also include risk (return) from market timing decisions. Dividing portfolio active return by portfolio tracking error gives the information ratio, which is a risk adjusted performance measure. Contents 1 Definition 1.1 Formulas 1.2 Interpretation 2 Examples 3 References 4 External links Definition[edit] If tracking error is measured historically, it is called 'realized' or 'ex post' tracking error. If a model is used to predict tracking error, it is called 'ex ante' tracking error. Ex-post tracking error is more useful for reporting performance, whereas ex-ante tracking error is generally used by portfolio managers to control risk. Various types of ex-ante tracking error models exist, from simple equity models which use beta as a primary determinant to more complicated multi-factor fixed income models. In a factor model of a portfolio, the non-systematic risk (i.e., the standard deviation of the residuals) is called "tracking error" in the investment field. The la
»financecommentsWant to join? Log in or sign up in seconds.|Englishlimit my search to /r/financeuse the following search parameters to narrow your results:subreddit:subredditfind
Ex Ante Tracking Error Example
submissions in "subreddit"author:usernamefind submissions annualized tracking error formula by "username"site:example.comfind submissions from "example.com"url:textsearch for "text" ex ante tracking error fixed income in urlselftext:textsearch for "text" in self post contentsself:yes (or self:no)include (or exclude) https://en.wikipedia.org/wiki/Tracking_error self postsnsfw:yes (or nsfw:no)include (or exclude) results marked as NSFWe.g. subreddit:aww site:imgur.com dogsee the search faq for details.advanced search: by author, subreddit...this post was submitted https://www.reddit.com/r/finance/comments/33a7i3/calculating_exante_tracking_error_of_a_portfolio/ on 20 Apr 20153 points (71% upvoted)shortlink: remember mereset passwordloginSubmit a new linkSubmit a new text postfinancesubscribeunsubscribe80,977 readers~61 users here nowFinance - #redditfinance and #finance on freenode Welcome to r/Finance - a place to discuss multiple facets of corporate and advanced finance (and careers within), including: financial theory, investment theory, valuation, financial modeling, financial practices, and news related to these topics. Rules: Questions regarding loans, refinancing, mortgages, credit cards, investing and anything el
help Tour Start here for a quick overview of the site Help Center Detailed answers to any questions you might have Meta Discuss the workings http://quant.stackexchange.com/questions/15155/understanding-how-to-calculate-tracking-error and policies of this site About Us Learn more about Stack Overflow the company Business Learn more about hiring developers or posting ads with us Quantitative Finance beta Questions Tags Users Badges Unanswered Ask Question _ Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. Join them; it only takes a minute: Sign up tracking error Here's how it works: Anybody can ask a question Anybody can answer The best answers are voted up and rise to the top Understanding how to calculate tracking error up vote 1 down vote favorite 1 I have come across two ways of calculating Tracking Error (TE) but i'm not sure if they are essentially the same. The first way ex ante tracking is to calculate the standard deviation of the difference between a fund's returns and a benchmark as shown here. The second method is to run a regression and calculate the standard deviation of the error terms and shown here in section 8. Many of the academic papers I have read use the latter. My question is, do these 2 methods yield the same answer? regression tracking-error share|improve this question asked Oct 25 '14 at 15:39 roland 938 add a comment| 1 Answer 1 active oldest votes up vote 1 down vote This appears to be the same thing, however, in the former case, the benchmark is the FF-Model. This means you assume the model stated in their eq. 9 is correct (as per your regression), and use the vol of the residuals as TE. They go on and explain: The volatility of the residuals in equation [9] is a measure of idiosyncratic (non-systematic) risk.20 Since alpha measures the return earned for taking on idiosyncratic risk, the information ratio measures of the amount of idiosyncratic return earned per uni
be down. Please try the request again. Your cache administrator is webmaster. Generated Thu, 06 Oct 2016 01:27:58 GMT by s_hv987 (squid/3.5.20)