70.2K

Verified Solution

Link Copied!

_{Consider the annual returns produced by two different active equity portfolio managers (A and B) as well as those to the stock index with which they are both compared:}

Period	Manager A	Manager B	Index
1	13.3	12.0	11.1
2	-2.1	-4.7	-2.3
3	14.9	13.2	18.5
4	0.4	2.9	-0.7
5	-7.3	-5.5	-3.8
6	23.5	24.4	21.3
7	-10.8	-11.7	-13.5
8	5.4	5.5	5.4
9	3.6	3.3	2.4
10	19.4	18.0	19.3

A. Did either manager outperform the index, based on the average annual return differential that he or she produced relative to the benchmark? Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to two decimal places.

Manager A: %

Manager B: %

-Select: Manager A / Manager B 's average return is less than the index and -Select: Manager A / Manager B 's average exceeded that of the index.

B. Calculate the tracking error for each manager relative to the index. Which manager did a better job of limiting his or her client's unsystematic risk exposure? Do not round intermediate calculations. Round your answers to two decimal places.

Manager A: %

Manager B: %

-Select: Manager A / Manager B did the better job of limiting the client's exposure to unsystematic risk as the difference between manager's returns and those of the index has a -Select: larger / smaller standard deviation.

Answer & Explanation Solved by verified expert

See Answer