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Username: Andrew

Rating:
Guru Stars

Asked to: Tom Burke

Date Created: 12 Feb 2018
Category 28
Tag Financial
Question What is a 'Tracking Error'?
Advice from Guru
Hi Andrew,

Tracking error is the divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge or mutual fund that did not work as effectively as intended, creating an unexpected profit or loss instead.

Tracking error is reported as a standard deviation percentage difference, which reports the difference between the return an investor receives and that of the benchmark he was attempting to imitate.

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