Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tracking Error can be calculated Either by running an OLS regression of a fund/portfolio against its benchmark OR by calculating the standard deviation of the

Tracking Error can be calculated Either by running an OLS regression of a fund/portfolio against its benchmark OR by calculating the standard deviation of the difference in returns between the Fund/portfolio and its Benchmark. Tracking Error calculated by running an OLS regression of the fund/portfolio against its benchmark will be a _____________ value than when calculated using the standard deviation of the difference in returns between a fund/portfolio and its benchmark, because ___________________________.

higher; OLS regression adjusts for the beta

lower; OLS regressions minimise the sum or square of errors.

same; tracking error is generated by creating the portfolio different from the benchmark and has no relevance on the methodology of calculation

same or higher; OLS regressions are affected by multi-collinearity

lower; OLS regressions adjusts for the degrees of observations

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Routledge Handbook Of Critical Finance Studies

Authors: Christian Borch, Robert Wosnitzer

1st Edition

1138079812, 978-1138079816

More Books

Students also viewed these Finance questions

Question

Guidelines for Informative Speeches?

Answered: 1 week ago