I think active risk and tracking error are the same thing. And information ratio = active return/ active risk
Whats the difference between Debt service and interest expence? Is it just the principle repayment?
ilvino Wrote: ------------------------------------------------------- > I think active risk and tracking error are the > same thing. > > And information ratio = active return/ active risk tracking error is active return not active risk: Rp-Rb = error of tracking the benchmark
AF …debt service = your principal and interest payment.
Tracking Error = Active Return = Rp - Rb
dinesh…the cfa glossary say tracking risk or tracking error or active risk is the standard deviation of the differences between portfolio’s returns and its benchmark returns
I got totally confused… Let me retry… Active return = Tracking Error = Rp - Rb Active risk = Tracking Risk = s(Rp - Rb) Is this correct now?
dinesh.sundrani Wrote: ------------------------------------------------------- > I got totally confused… Let me retry… > > Active return = Tracking Error = Rp - Rb > Active risk = Tracking Risk = s(Rp - Rb) > > Is this correct now? active return = Rp - Rb Active risk = Tracking Risk = tracking error = s(Rp - Rb)
It’s the whole tracking error part. This is from CFA text: Active risk is standard deviation of active returns. A traditional synonym is tracking error (TE), but the term may be confusing unless error is associated by the reader with the standard deviation. It says tracking risk is now common in use and they actually use TE to stand for tracking risk. The long and short is that i don’t think there’s a definite answer, but the CFA would have to tell us what they were talking about. I wouldn’t worry about it.
Shucks… Schweser taught me what I wrote… Book-3 Pg 234. Means schweser is totally wrong?