Modern Finance TrackingError

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TrackingError

Returns the annualized standard deviation of the asset's return less the benchmark's.

Syntax

TrackingError( assetReturns( ), benchmarkReturns( ), frequency )

Examples

#import "std/money"
using money

'' The SAMPLE standard deviation of the active return -- asset minus
'' benchmark -- annualized.  How tightly the portfolio follows its index.
dim as float64 r( 0 to 11 ) = { 0.02, -0.01, 0.03, 0.015, -0.025, 0.04, _
                               0.01, -0.005, 0.02, 0.03, -0.015, 0.025 }
dim as float64 b( 0 to 11 ) = { 0.018, -0.012, 0.025, 0.012, -0.02, 0.035, _
                               0.008, -0.004, 0.018, 0.028, -0.012, 0.022 }

print TrackingError( r( ), b( ), RETURN_MONTHLY ).Value( )       '' 0.01038793005892372

'' A portfolio identical to its benchmark tracks it exactly.
print TrackingError( b( ), b( ), RETURN_MONTHLY ).Value( )       '' 0

'' Mismatched lengths are a named refusal.
dim as float64 short_( 0 to 4 ) = { 0.01, 0.02, 0.01, 0.02, 0.01 }
print TrackingError( r( ), short_( ), RETURN_MONTHLY ).Failure( ).Message( )

---

Library: Finance
Category: Finance
Documented under: Nothing Becomes A Keyword
Source: pkg/std/money/finport.tiko in the tiko repository.