Consider the annual returns produced by a passive equity portfolio manager as well as those of...

 

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Consider the annual returns produced by a passive equity portfolio manager as well as those of the stock index with which they are both compared. Period 1 2 3 4 5 6 7 8 9 10 Manager A (%) 12.8 -2.1 15.6 0.8 -7.9 23.2 -10.4 5.6 2.3 19.0 Index (%) 11.8 -2.2 18.9 -0.5 -3.9 21.7 -13.2 5.3 2.4 19.7 a. Calculate the tracking error for the manager relative to the index. Consider the annual returns produced by a passive equity portfolio manager as well as those of the stock index with which they are both compared. Period 1 2 3 4 5 6 7 8 9 10 Manager A (%) 12.8 -2.1 15.6 0.8 -7.9 23.2 -10.4 5.6 2.3 19.0 Index (%) 11.8 -2.2 18.9 -0.5 -3.9 21.7 -13.2 5.3 2.4 19.7 a. Calculate the tracking error for the manager relative to the index.

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A First lets calculate the differences between the managers returns and the index returns for each p... View the full answer