Tracking error represents the difference between the return on a tracker fund - a fund designed to track a market index - and the performance of that index. Tracker funds can be contrasted with actively managed funds which aim to outperform market indices.
The error in indication at a scale mark, expressed in percentage of fiducial value, when the instrument is energized by the proportional value of the actual end-scale excitation.
The measure of a phonograph stylus' ability to accurately retrace the grooves on a record. The lower the tracking error, the more accurate the stylus.
In portfolio management, tracking error is used as a measure of the risk of outperforming or underperforming a benchmark and is usually stated in annualised percentage terms. Specifically it is the standard deviation of relative returns of the manager compared to the benchmark. A tracking error of 3% for example, indicates that there is a 68% probability that the annualised relative return will be within 3% of the annualised benchmark return over the period under review (i.e. +/- standard deviation). Historic tracking error (ex-post) is calculated using actual portfolio and benchmark performance. Forward-looking tracking error(ex-ante) is calculated by applying historic issue volatility to current portfolio holdings and gives an indication of the risk of outperforming or underperforming the benchmark assuming that past market performance patterns are repeated in the future.
A statistical term which measures the likely difference between the performance of a portfolio and the underlying benchmark.
The amount of difference between the performance of a specific portfolio of stocks and a broad-based index with which they are being compared. See market basket.
How much a fund's returns deviate from the benchmark index's return.
Measure, expressed as a percentage, of the deviation of the return of a fund relative to the return of its benchmark over a given period. This statistic shows how closely the fund tracks its benchmark.
The difference in returns between a fund and its benchmark; also the extent to which a tracker fund tracks its benchmark.
A measure of the extent to which a basket or portfolio designed to replicate the performance of an index fails to do so. A measure of how exact an arbitrage equivalent is.
A measurement of the extent that a fund's performance has varied from its target index or benchmark.
The difference in movement of a playback stylus across the face of a phonograph record compared with the cutting stylus on the disc recording machine.
The degree to which the performance of the strategy used to create the portfolio differs to those of the benchmark index. Tracking error is used within FTSE when derivative indices are being created in support of portfolios based upon specific benchmark indices.
A statistical measure of how closely a fund's performance moves in line with its Benchmark. A Tracking Error of 2% is relatively low, 5% is above average and indicates an active style of management.
When using an indexing strategy, the amount by which the performance of the portfolio differed from that of the benchmark.
The standard deviation of the difference of two return series.
Tracking error is used as a measure of risk taken against a fundâ€(tm)s Benchmark by measuring the standard deviation of their relative returns (fund taken as the numerator). A larger tracking error indicates greater positions were taken relative to a fundâ€(tm)s benchmark than a lower tracking error would suggest.
Net asset value tracking error is the difference between the net asset value of the fund or trust and the return of the index on which the fund is based. Price to index tracking error is the difference between the returns based on closing market prices for a fund or trust and the returns based on the closing market prices of the underlying index.
Percentage amount a fund's assets deviate from its benchmark index. This should be quite small.
the difference between an investment's return and the return of its benchmark over a set period of time; if tracking error is negative it has outperformed its benchmark
Tracking error measures the standard deviation of the excess returns of a composite compared to its benchmark. This gives an indication of the volatility of a portfolio versus its benchmark. It does not show whether or not the portfolio manager added value to the return of a portfolio versus that of the market.
In an indexing strategy, the difference between the performance of the benchmark and the replicating portfolio.
The Tracking Error is the annual divergence between the performance of the fund and that of the benchmark. It allows us to see how the variations in fund performance are similar to those of the index. The lower the Tracking Error, the more the variations of the fund's performance match those of its index. A Tracking Error equal to zero means that the relative performance of the fund to its benchmark is constant. The Tracking Error is often used as a measure of risk compared to the benchmark: the higher it is, the greater the bets the fund manager has taken compared to the benchmark.
The expected or actual maximum deviation of a fund's returns from those of a relevant index or benchmark.
Measures the difference between the performance of a portfolio and a broad-based market index with which the portfolio is compared.
A divergence between the price behavior of a position or portfolio and the price behavior of a benchmark. This often is in the context of a hedge that did not work as effectively as intended, instead creating an unexpected profit or loss.
Indicator measuring the volatility of the return on a portfolio relative to the return on the underlying index. The unit of measurement is the standard deviation over a period of time, usually 60 days. In a passively managed portfolio, the lower the tracking error, the better the replication of the index.
The difference between the performance of a portfolio of stocks vs. an index.
The volatility of returns of a fund relative to its benchmark.
Many portfolios are managed to a benchmark, such as an index. Some portfolios are expected to replicate the returns of an index exactly (an index fund), while others are expected to deviate slightly from the index in order to generate excess returns or to lower transaction costs. Tracking error is a measure of how closely the portfolio follows the index, and is measured as the standard deviation of the difference between the portfolio and index returns.