There is a direct relationship between a passive portfolio's tracking error relative to its index and the time and expense necessary to create and maintain the portfolio.

Question

Quizplus · Accepted Answer

A passive portfolio aims to replicate the performance of its index, minimizing tracking error and associated costs. Increased time and expense do not necessarily lead to a lower tracking error, as the goal is efficient replication, not active management or frequent adjustments.

There Is a Direct Relationship Between a Passive Portfolio's Tracking