Tracking Error Tough one

[rahul.goyl]

Hi David,

I am sorry to post so many of them.. how to go about this
How to go about this
Suppose the daily returns of a portfolio and a benchmark portfolio it is replicating as follows:
Portfolio Return(bps) Benchmark Portfolio Return(bps)
Day 1 34 30
Day 2 -89 -87
Day 3 108 102
Day 4 70 70
What is the tracking error over the four day period?
a) 3.16 bps
b) 2 bps
c) 10 bps
d) 2.39 bps

Thanks
Rahul

 

[David Harper CFA FRM]

Hi Rahul,

STDEVP(4,-2,6.0) = 3.16 bps

(I don't mind easy ones that may be helpful to my paying customers... although if you are really sorry: pay for a membership and support our continued existence in the face of piracy threats)

David