Diversification and Gerneralized Tracking Errors For Correlated Non-Normal Returns

Details Diversification and Gerneralized Tracking Errors For Correlated Non-Normal Returns Diversification and Gerneralized Tracking Errors For Correlated Non-Normal Returns

2002-09-04

arxiv.org/abs/cond-mat/0209107v2

Physics

Condensed Matter

5 pages

Scientific paper

The probability distribution for the relative return of a portfolio constructed from a subset n of the assets from a benchmark, consisting of N assets whose returns are multivariate normal, is completely characterized by its tracking error. However, if the benchmark asset returns are not multivariate normal then higher moments of the probability distribution for the portfolio's relative return are not related to its tracking error. We discuss the convergence of generalized tracking error measures as the size of the subset of benchmark assets increases. Assuming that the joint probability distribution for the returns of the assets is symmetric under their permutations we show that increasing n makes these generalized tracking errors small (even though n<>1 the probability distribution for the portfolio's relative return is approximately symmetric and strongly peaked about the origin. The results of this paper generalize the conclusions of Dynkin et. al. (2002) to more general underlying asset distributions.

Affiliated with

Also associated with

No associations

Rating

Diversification and Gerneralized Tracking Errors For Correlated Non-Normal Returns does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Diversification and Gerneralized Tracking Errors For Correlated Non-Normal Returns, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Diversification and Gerneralized Tracking Errors For Correlated Non-Normal Returns will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-465921