Skip to main content
Article thumbnail
Location of Repository

Tracking error: ex-ante versus ex-post measures

By Soosung Hwang and S. (Stephen) Satchell


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

Topics: HB, HD61
Publisher: Warwick Business School, Financial Econometrics Research Centre
Year: 2001
OAI identifier:

Suggested articles


  1. A New Measure of Herding and Empirical Evidence, doi
  2. A Panel-Based Investigation into the Relationship Between Stock Prices and Dividends,
  3. An Analysis of Performance Measures Using Copulae, doi
  4. An Analysis of the Performance of European Foreign Exchange Forecasters, doi
  5. An Elementary Account of Amari's Expected Geometry, doi
  6. An Introduction to Differential Geometry in Econometrics, doi
  7. Ana-Maria Fuertes and Maria-Teresa Perez, Numerical Issues in Threshold Autoregressive Modelling of Time Series, doi
  8. Calculating the Miss-specification in Beta from Using a Proxy for the Market Portfolio, doi
  9. (2000). Choosing Managers and Funds,” doi
  10. Co-Volatility and Correlation Clustering: A Multivariate Correlated ARCH Framework,
  11. Currency Spillovers and Tri-Polarity: a Simultaneous Model doi
  12. Evaluating the Performance of Nearest Neighbour Algorithms when Forecasting US Industry Returns,
  13. Evolving Systems of Financial Returns: AutoRegressive Conditional Beta,
  14. Finite Sample Inference for Extreme Value Distributions,
  15. Forecasting Inflation with a Non-linear Output Gap Model,
  16. Forecasting T-Bill Yields: Accuracy versus Profitability,
  17. From Market Micro-structure to Macro Fundamentals: is there Predictability in the Dollar-Deutsche Mark Exchange Rate?,
  18. Hopscotch Methods for Two State Financial Models, doi
  19. How do UK-Based Foreign Exchange Dealers Think Their Market Operates?, WP99-21 2. Soosung Hwang, doi
  20. Implied Volatility Forecasting: A Compaison of Different Procedures Including Fractionally Integrated Models with Applications to UK Equity Options,
  21. Improved Testing for the Efficiency of Asset Pricing Theories in Linear Factor Models,
  22. Investigating Dynamic Dependence Using Copulae, doi
  23. Market Risk and the Concept of Fundamental Volatility: Measuring Volatility Across Asset and Derivative Markets and Testing for the Impact of Derivatives Markets on Financial Markets, doi
  24. Modelling Emerging Market Risk Premia Using Higher Moments, doi
  25. Multivariate Extremes at Work for Portfolio Risk Measurement,
  26. On the Evolution of Credibility and Flexible Exchange Rate Target Zones,
  27. Option Hedging with Stochastic Volatility, doi
  28. Properties of Cross-sectional Volatility, doi
  29. Rationality Testing under Asymmetric Loss, doi
  30. Rethinking the Forward Premium Puzzle in a Nonlinear Framework,
  31. Robust Decision Theory and the Lucas Critique, doi
  32. Soosung Hwang and Stephen Satchell, Using Bayesian Variable Selection Methods to Choose Style Factors in Global Stock Return Models, doi
  33. Technical Analysis and Central Bank Intervention, doi
  34. The Asset Allocation Decision in a Loss Aversion World, doi
  35. The Derivation of New Model of Equity Duration,
  36. The Effects of Systematic Sampling and Temporal Aggregation on Discrete Time Long Memory Processes and their Finite Sample Properties, doi
  37. The Felsdtein-Horioka Puzzle is Not as Bad as You Think, doi
  38. Tracking Error: Ex-Ante versus Ex-Post Measures, doi
  39. Vado Durrleman, Ashkan Nikeghbali, Gael Riboulet and Thierry Roncalli, Copulas: an Open Field for Risk Management, doi
  40. Valuing Information Using Utility Functions, doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.