Replication errors
The tracking error (English tracking error , abbreviation TE) refers to the unintentional deviation between the performance of an index fund or portfolio in relation to its benchmark over a certain period of observation.
The term tracking error is used differently:
- For the relative difference between the benchmark and the portfolio - the difference in return in percentage points.
- For the standard deviation of these differences between the benchmark and the portfolio. The above-mentioned relative difference is then also considered as a separate key figure tracking difference (English tracking difference , abbreviation TD).
In both meanings, a low tracking error stands for a performance that is very similar to the benchmark , a high tracking error for large deviations of the fund development from the performance of the benchmark.
When considering funds, the net asset value and not the market value is usually used for comparison.