Tracking error is defined as a the difference between

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12. Tracking error is defined as A. the difference between the returns on the overall risky portfolio versus the benchmark return. B. the variance of the return of the benchmark portfolio C. the variance of the return difference between the portfolio and the benchmark D. the variance of the return of the actively-managed portfolio E. none of the above. Tracking error is defined as the difference between the returns on the overall risky portfolio versus the benchmark return. Difficulty: Moderate 27-6
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Chapter 27 - The Theory of Active Portfolio Management 13. The tracking error of an optimized portfolio can be expressed in terms of the ____________ of the portfolio and thus reveal ____________. The tracking error of an optimized portfolio can be expressed in terms of the beta of the portfolio and thus reveal benchmark risk. Difficulty: Moderate 14. The Treynor-Black model is a model that shows how an investment manager can use security analysis and statistics to construct __________. The Treynor-Black model is a model that shows how an investment manager can use security analysis and statistics to construct an active portfolio. Difficulty: Easy 15. If a portfolio manager consistently obtains a high Sharpe measure, the manager's forecasting ability __________. The manager with the highest Sharpe measure presumably has true forecasting abilities. Difficulty: Easy 27-7
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Chapter 27 - The Theory of Active Portfolio Management 27-8
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Chapter 27 - The Theory of Active Portfolio Management 16. Active portfolio management consists of __________. A. market timing B. security analysis C. indexing D. A and B E. none of the above Although one can engage in various degrees of active portfolio management (security selection without market timing and vice versa), the most active portfolio management strategy consists of engaging in both pursuits. Difficulty: Easy 17. Passive portfolio management consists of __________. Although one can engage in various degrees of active portfolio management (security selection without market timing and vice versa), the most active portfolio management strategy consists of engaging in both pursuits. Passive management is an indexing strategy. Difficulty: Easy
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