Suppose you found that the tracking error of a bond portfolio, which you obtained by using...
Suppose you found that the tracking error of a bond portfolio, which you obtained by using monthly data, is 8.5 basis points. What is the corresponding annual tracking error for this portfolio?
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Homework Answers
To convert the monthly tracking error to an annual tracking error, we simply need to multiply the monthly error by the square root of 12. Hence, annual tracking error = 0.085% x sqrt(12) = 0.29444% = 29.444 basis points.
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Suppose you found that the tracking error of a bond portfolio,
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