tracking error


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Tracking error

In an indexing strategy, the standard deviation of the difference between the performance of the benchmark and the replicating portfolio.

Tracking Error

An excessive deviation between an investment or portfolio and some benchmark. It is commonly used with respect to mutual funds, hedges, or other investment vehicles designed to track some index or other benchmark. If the portfolio's performance falls short of the benchmark, especially by a large amount, there is said to be a tracking error; an investor or investment company may wish to re-evaluate how it puts together the portfolio.

tracking error

The difference in the return earned by a portfolio and the return earned by the benchmark against which the portfolio is constructed. For example, if a bond portfolio earns a return of 5.15% during a period when the portfolio's benchmark (say, for example, the Lehman Brothers Index) produces a return of 5.06%, the tracking error is .09%, or 9 basis points.
References in periodicals archive ?
2005) use different measures of risk in mathematical programming models, such as return variance, semi-variance, tracking error variance, or value at risk (VAR).
The control law of Equation (6) is able to stabilize the tracking error into the set defined by Equation (10), which can be seen from Equation (11).
We selected the gain that produced the lowest tracking error.
For a 100m x 100m test grid, the maximum tracking error of ML is 0.
Tracking error is a measure of the extent to which a portfolio's historical returns did not resemble those of the benchmark,
Technology enhances the degree of analysis and the degree of insight that you can bring to the combination of securities that you put in a portfolio with respect to risk, volatility, tracking error, trading, all sorts of things.
No management or transaction fees, and no tracking error.
The scope of the service contract includes, inter alia,- Processing and tracking error messages;- On-site use on WDR locations in North Rhine-Westphalia, Paris and Brussels;- 2 Maintenance classes;- Quarterly change messages to adapt the service to be set equipment, with periodic billing and reporting.
The lag between receiving and reinvesting the cash led to a variance which led to a tracking error which was higher than anticipated.
The benefit of proportional following is that clients can track their chosen trader (s) using a small amount of funds whilst minimising tracking error.
The fund s tracking error is the lowest for several years.