IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v2y2001i3d10.1057_palgrave.jam.2240049.html
   My bibliography  Save this article

Tracking error: Ex ante versus ex post measures

Author

Listed:
  • SE Satchell

    (Faculty of Economics and Politics, Austin Robinson Building)

  • S Hwang

    (Faculty of Economics and Politics, Austin Robinson Building)

Abstract

In this paper we show that ex ante and ex post tracking errors must necessarily differ, since portfolio weights are ex post stochastic in nature. In particular, ex post tracking error is always larger than ex ante tracking error. Our results imply that fund managers always have a higher ex post tracking error than their planned tracking error, and thus unless our results are considered, any performance fee based on ex post tracking error is unfavourable to fund managers.

Suggested Citation

  • SE Satchell & S Hwang, 2001. "Tracking error: Ex ante versus ex post measures," Journal of Asset Management, Palgrave Macmillan, vol. 2(3), pages 241-246, December.
    • Handle: RePEc:pal:assmgt:v:2:y:2001:i:3:d:10.1057_palgrave.jam.2240049
    DOI: 10.1057/palgrave.jam.2240049
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/palgrave.jam.2240049
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/palgrave.jam.2240049?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luca Riccetti, 2012. "Using tracking error volatility to check active management and fee level of investment funds," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 14(3), pages 139-158.
    2. Jezek, M., 2009. "Passive Investors, Active Traders and Strategic Delegation of Price Discovery," Cambridge Working Papers in Economics 0951, Faculty of Economics, University of Cambridge.
    3. Carol Alexander & Anca Dimitriu, 2003. "Equity Indexing: Conitegration and Stock Price Dispersion: A Regime Switiching Approach to market Efficiency," ICMA Centre Discussion Papers in Finance icma-dp2003-02, Henley Business School, University of Reading.
    4. Nadima El-Hassan & Paul Kofman, 2003. "Tracking Error and Active Portfolio Management," Australian Journal of Management, Australian School of Business, vol. 28(2), pages 183-207, September.
    5. Auer, Benjamin R. & Schuhmacher, Frank & Niemann, Sebastian, 2023. "Cloning mutual fund returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 31-37.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:assmgt:v:2:y:2001:i:3:d:10.1057_palgrave.jam.2240049. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.