Tag: tracking error (Page 2 of 2)
Benchmarks can be used to gauge performance, to determine the appropriate fit of a strategy, and to set our expectations of model accuracy.
Concentrated portfolios put a large emphasis on model accuracy. We can estimate the potential whipsaw in portfolios by looking at changes in tracking error.
If we decide when to trade based on the amount of tracking error, we can reduce portfolio turnover. However, the cost may be more tracking error!
Many investors use ETFs to gain specific exposures. Looking at tracking error is helpful when evaluating whether these ETFs will meet their goals.
