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| Author: | Satchell, S. E. Hwang, S. |
| Title: | Tracking error: ex ante versus ex post measures |
| Journal: | Journal of asset management
2001 : DEC, VOL. 2:3, p. 241-246 |
| Index terms: | Performance measurement Performance management Portfolio management |
| Freeterms: | Tracking error |
| Language: | eng |
| Abstract: | The authors 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. The results imply that fund managers always have a higher ex post tracking error than their planned tracking error, and thus unless the results are considered, and performance fee based on ex post tracking error is unfavourable to fund managers. |
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