# Ex-Ante tracking error how to determine the look back period

I am looking to compare the ex-ante predictions against the post values. I am using a look back period of ranges from 1 year to 5 years to construct my covariance matrix that I am using for my ex-ante predictions (calculation below). I am unsure of how to determine the best look back period?

   te_ante = sqrt(relative_wgts * cov_matrix * relative_wgts') * sqrt(4)

• I'm calculating the te_ante every quarter hence the sqrt(4) to give me an annualised te_ante.
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Hi, do you want to compare ex-ante TE to ex-post TE? It depends on the purpose but this does not make too much sense too me. If you don't have a lot of trading then the numbers will be very close if you put in the same data, if you have a lot of trading then they will differ a lot. –  Richard Mar 13 '14 at 10:39
What would make sense is to estimte TE ex-ante and then look at future active return. Similar to VaR back-testing. –  Richard Mar 13 '14 at 10:40
sorry a mistake on my part. Having read your comments about taking the TE ex-ante and looking at the future active return its clear that is what I was been asked to do. –  mHelpMe Mar 13 '14 at 13:17