Problem $11-07$

Consider the annual returns produced by two different active equity portfolio managers $($ A and $B)$ as well as those to the stock index with which they are both compared:

a$.$ Did either manager outperform the index, based on the average annual return differential $($portfolio return minus index return$)$ produced relative to the benchmark?

Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to two decimal places.

Manager A:

$\%$

Manager B:

$\%$

I$\text{'}$s average return is less than the index and

$\text{'}$s average exceeded that of the index.

b$.$ Calculate the tracking error for each manager relative to the index. Which manager did a better job of limiting client's unsystematic risk exposure? Do not round

intermediate calculations. Round your answers to two decimal places.

Manager A:

$\%$

Manager B:

$\%$

did the better job of limiting the client's exposure to unsystematic risk as the difference between manager's returns and those of the index has a

standard deviation.