Tracking Error and Active Portfolio Management

Nadima El-Hassan () and Paul Kofman
Additional contact information
Paul Kofman: Department of Finance, The University of Melbourne, Parkville, VIC 3010.

Australian Journal of Management, 2003, vol. 28, issue 2, 183-207

Abstract: Persistent bear market conditions have led to a shift of focus in the tracking error literature. Until recently the portfolio allocation literature focused on tracking error minimization as a consequence of passive benchmark management under portfolio weights, transaction costs and short selling constraints. Abysmal benchmark performance shifted the literature's focus towards active portfolio strategies that aim at beating the benchmark while keeping tracking error within acceptable bounds. We investigate an active (dynamic) portfolio allocation strategy that exploits the predictability in the conditional variance-covariance matrix of asset returns. To illustrate our procedure we use Jorion's (2002) tracking error frontier methodology. We apply our model to a representative portfolio of Australian stocks over the period January 1999 through November 2002.

Keywords: TRACKING ERROR CONSTRAINT; ACTIVE PORTFOLIO ALLOCATION (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/031289620302800204 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:28:y:2003:i:2:p:183-207

DOI: 10.1177/031289620302800204

Access Statistics for this article

More articles in Australian Journal of Management from Australian School of Business
Bibliographic data for series maintained by SAGE Publications ().