BU473 Chapter Notes - Chapter 15: Standard Deviation, Tracking Error
Document Summary
Long-term buy-and-hold strategy: usually tracks an index over time, designed to match index return. Active equity portfolio management strategies: attempts to outperform a passive benchmark. Full replication: all securities in the index are purchased in proportion to weights in the index, this helps ensure close tracking. The goal of passive manager is to minimize the portfolio"s return volatility relative to the index (i. e. minimize tracking error) Tracking error measure: return differential in time period t. Index funds: replicate the composition of the particular index exactly, will by exact securities comprising the index in their exact weights, change these positions anytime the composition of the index itself has changed. Etfs: they can be bought or sold like common stock, notable etf examples. S&p 500 depository receipts: regional or country etfs. Active equity portfolio management strategies: goal is to earn a portfolio return that exceeds the return of a passive benchmark the return of a passive benchmark portfolio.