What is a good tracking error?
Low tracking error means a portfolio is closely following its benchmark. High tracking errors indicates the opposite. Thus, tracking error gives investors a sense of how “tight” the portfolio in question is around its benchmark or how volatile the portfolio is relative to its benchmark.Click to see full answer. Likewise, what is a good tracking…
Low tracking error means a portfolio is closely following its benchmark. High tracking errors indicates the opposite. Thus, tracking error gives investors a sense of how “tight” the portfolio in question is around its benchmark or how volatile the portfolio is relative to its benchmark.Click to see full answer. Likewise, what is a good tracking error for an active fund?Theoretically an index fund should have a tracking error of zero relative to its benchmark. Enhanced index funds typically have tracking errors in the 1%-2% range. Most traditional active managers have tracking errors around 4%-7%. what is tracking error in investing? In finance, tracking error or active risk is a measure of the risk in an investment portfolio that is due to active management decisions made by the portfolio manager; it indicates how closely a portfolio follows the index to which it is benchmarked. Many portfolios are managed to a benchmark, typically an index. People also ask, how do you interpret tracking errors? Tracking error is formally defined as the standard deviation of the difference between the returns of the portfolio and the returns of the benchmark—or the dispersion of the excess portfolio returns compared with its benchmark. It’s typically expressed both as an annualized number and as a percentage.What is a good information ratio?A higher information ratio means that the active manager had a better ability to outperform the benchmark – and for a longer period of time. If the information ratio is between 0.4 and 0.6, it is considered to be a good investment, and an information ratio between 0.61 and 1 is considered to be a great investment.
