Tracking error refers to how closely an index fund mirrors the movements of the existing index.

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Quizplus · Accepted Answer

Tracking error is indeed a measure of how closely an index fund follows the movements of its benchmark index. It indicates the degree to which the fund's returns deviate from those of the index, after accounting for all expenses and fees. The lower the tracking error, the better the fund's performance in replicating the index.

Tracking Error Refers to How Closely an Index Fund Mirrors