The cost of active management is the coefficient $\sigma$ER, and it is sometimes referred to as
A) market timing.
B) reward for risk.
C) excess reward.
D) excess risk.
E) tracking error.

Question

The cost of active management is the coefficient  $\sigma$ER, and it is sometimes referred to as
A) market timing.
B) reward for risk.
C) excess reward.
D) excess risk.
E) tracking error.

Quizplus · Accepted Answer

The cost of active management is often referred to as "tracking error." This term describes the deviation of the return on a portfolio from the return on the benchmark against which it is measured. It reflects the risk taken by an active manager in deviating from the benchmark to achieve excess returns.

The Cost of Active Management Is the Coefficient σ\sigmaσ ER, and It Is Sometimes Referred to as A) Market

The Cost of Active Management Is the Coefficient $\sigma$ ER, and It Is Sometimes Referred to as
A) Market