I don’t understand why the time span = at least 2/3 of the time periods the time was not mentioned in the example at all? am I missing anything here?
does it say 1 std away?
only mentioned the target tracking risk = 1% though
if std is 1% then 2/3 of the time return will fall in +/- 1% of expected return
this is sth I dont get it. on pg328, para1, the 3rd sentence: therefore, a tracking risk of 30bps would indicate that, in approx. 2/3 of the time periods, the portfolio return would be within a band of the bm plus or minus 30bps. even 30bps also 2/3 of time periods?
getting late so won’t be cracking the books open right now but I’ll try to get to it tomorrow when I get home from work…
OKay… I think I actually remember this question… and compscikid is right… for 1% standard deviation, 2/3rd’s of the observations will be on either side of the mean. In either case, whether it be 1% tracking risk target or 30bps, consider those to be the mean and you’re looking at 2/3rd’s of the observations be on either side of it. The smaller the mean, or in this case, tracking risk, the closer the portfolio matches the benchmark. PJStyles
remember that 1 std away from the mean in normal distribution covers about 68% under the bell curve (about 34% on each side), 2/3 or 66.67% is an approximation but does the job