Actively managing tracking error

Authors: Burmeister, Curt; Mausser, Helmut; Mendoza, Rafael

Source: Journal of Asset Management, Volume 5, Number 6, 1 April 2005 , pp. 410-422(13)

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Abstract:

Managing tracking error on an ex ante basis requires an ability to assess the possible effects of trades on a fund's performance relative to its benchmark. This paper develops several simple diagnostic tools to help fund managers evaluate alternative trading strategies in terms of their potential for reducing tracking error. Moreover, risk reductions can be readily balanced against trading requirements and impacts on active return to identify desirable strategies.Journal of Asset Management (2005) 5, 410-422; doi:10.1057/palgrave.jam.2240157

Document Type: Research article

DOI: http://dx.doi.org/10.1057/palgrave.jam.2240157

Affiliations: 1: 1Algorithmics Incorporated, 185 Spadina Avenue, Toronto, Canada M5T 2C6, Tel: +1 416 2171500, Fax: +1 416 9716100, Email: hmausser@algorithmics.com

Publication date: 2005-04-01