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 bp
Why can't I use this formula for this question?
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 bp
Why can't I use this formula for this question?
