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Questions tagged [tracking-error]

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Marginal contribution to Tracking error

I'm trying to calculate Marginal contribution to Tracking error. I would use the following formula: MCTE(asset i)=TE(excess return asset i vs.benchmark)* Beta(excess return asset i vs. benchmark AND ...
198 views

Why is it better to use evolutionary algorithms than OLS for solving index tracking problem?

I am currently using different optimization algorithms for finding constrained portfolio that best replicate choosen index. So i have a optimization task to minimize tracking error. I wonder why every ...
144 views

Relationship between Tracking Error and Beta to benchmark

Analyzing an indexed portfolio, can we say there is any relationship between ex-ante TE and Beta to benchmark? Tracking error is the volatility of the difference in returns between the portfolio and ...
118 views

portfolio information ratio calculation on daily returns including hedged strategy results interpretation

I am tasked with calculating the portfolio information ratio on ~15 years of daily portfolio returns and I am finding several approaches online which is quite confusing. The first approach simply ...
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I have 3 time series X1, X2, X3. I want to find the coefficient (c1, c2) that will minimize the distance between them as follow: $$MIN\sum\sqrt{(X1-(c1*X2+c2*X3))^2}$$ The constrains are: $$-1< ... 2answers 6k views How to calculate ex Ante Tracking Error I'm looking to find the correct way to calculate the ex ante tracking error of a portfolio. If say I have 10 funds, and their historical returns series (used to calculate mean return, standard ... 0answers 61 views Subclass Tracking Error I am currently doing a master program project regarding tracking errors. My assignment is to evaluate following question: How to find out the correlation structure of the passive (=second order/sub-... 1answer 8k views How to calculate annualised tracking error? I have 36 months of relative returns and I need to calculate the annualised tracking error. So, using 36 months of returns is it simply like below: ... 1answer 2k views Understanding how to calculate tracking error I have come across two ways of calculating Tracking Error (TE) but i'm not sure if they are essentially the same. The first way is to calculate the standard deviation of the difference between a fund'... 1answer 548 views ETFs have lower tracking error than Futures? I used the daily returns of SPX Index, SPY US Equity, and SPA Index. I then calculate their standard deviation as hedging instruments with respect to SPX Index, i.e., (spx_ret - spy_ret) or (spx_ret - ... 1answer 1k views Ex-Ante tracking error how to determine the look back period I am looking to compare the ex-ante predictions against the post values. I am using a look back period of ranges from 1 year to 5 years to construct my covariance matrix that I am using for my ex-ante ... 1answer 1k views Min VaR and Min TE as second order cone program The quadratic optimization (min variance)$$ w^{T} \Sigma w \rightarrow \text{min},  where $w$ is the vector of portfolio weights and $\Sigma$ is the covariance matrix of asset returns, is a well ...
Let say I have $n$ assets and their returns over $m$ periods which are represented by a matrix $X \in \mathbb{R}^{m \times n}$, and I have some other asset with return over the same period which is ...