When using an indexing or any other benchmarking strategy, the amount by which the performance of the portfolio differed from that of the benchmark. In reality, no indexing strategy can perfectly match the performance of the index or benchmark, and the tracking error quantifies the degree to which the strategy differed from the index or benchmark, by measuring the standard deviation between the two values.
Related information about tracking error:
- Tracking error - Wikipedia, the free encyclopedia
In finance, tracking error is a measure of how closely a portfolio follows the index to which it is benchmarked. The best measure is the root-mean-square of the ...
- Tracking Error Definition | Investopedia
A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge or mutual fund ...
- Tracking error
Tracking error is a measurement of how much the return on a portfolio deviates from the return on its benchmark index. It is a very important metric for index ...
- Index Funds and Tracking Error - WSJ.com
Jul 9, 2012 ... Tracking error captures how much a portfolio veers from its benchmark. Here's what you need to know.
- Tracking Error - Financial Dictionary - The Free Dictionary
Tracking Error. Also found in: Acronyms, Encyclopedia, Wikipedia, 0.03 sec. Tracking error. In an indexing strategy, the standard deviation of the difference ...
- Mutual Funds: Understanding tracking error - Economic Times
Dec 19, 2011 ... Mutual funds hold a portfolio of financial securities and their performance is judged with respect to the performance of the market portfolios or ...
- INTRODUCING TRACKING ERROR - Parametric Portfolio Associates
This paper explains tracking error in more depth so as to help investors ... Annual tracking error is formally defined as the standard deviation of the difference ...
- Tracking Error | Personal Finance
Tracking error (or trailing return as defined by Morningstar) is the difference between the return on the fund and the return on the fund's benchmark.