TrackingError: Calculate Tracking Error of returns against a benchmark

In PerformanceAnalytics: Econometric Tools for Performance and Risk Analysis

Description

A measure of the unexplained portion of performance relative to a benchmark.

Usage

TrackingError(Ra, Rb, scale = NA)

Arguments

Ra	an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns
Rb	return vector of the benchmark asset
scale	number of periods in a year (daily scale = 252, monthly scale = 12, quarterly scale = 4)

Details

Tracking error is calculated by taking the square root of the average of the squared deviations between the investment's returns and the benchmark's returns, then multiplying the result by the square root of the scale of the returns.

TrackingError = sqrt(sum(Ra - Rb)^2 / (length(R) - 1)) * sqrt(scale)

Author(s)

Peter Carl

References

Sharpe, W.F. The Sharpe Ratio,Journal of Portfolio Management,Fall 1994, 49-58.

See Also

InformationRatio TrackingError

Examples

data(managers)
TrackingError(managers[,1,drop=FALSE], managers[,8,drop=FALSE]) 
TrackingError(managers[,1:6], managers[,8,drop=FALSE]) 
TrackingError(managers[,1:6], managers[,8:7,drop=FALSE])

PerformanceAnalytics documentation built on Feb. 6, 2020, 5:11 p.m.