What is tracking error?

Posted by Andrew Gordon on March 12
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Tracking error is as measure of how well the ETF is tracking the index it is trying to replicate. When comparing two ETFs the one with the lower tracking error is tracking the index better than the one with the higher tracking error.

 

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Written by Andrew Gordon

Andrew is the Head of Algorithmic Trading at Moola. He previously worked on the ETF Trading Desk for three and half years at Susquehanna International Group, a global quantitative trading firm. Andrew has a degree in Finance from Queen’s University Belfast.

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