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# GARP sample exam question

#### Deepak Chitnis

##### Active Member
Subscriber
Dear David/Nicole,
On the GARP book of FOUNDATION(2015 edition) sample question I got confused in question no. 2 which is on tracking error. The question is as follows.
Benchmark return Fund returns
9.00% 1.00%
7.00% 3.00%
7.00% 5.00%
5.00% 4.00%
2.00% 1.50%
what is the tracking error of the portfolio?
A.0.09%
B.1.10%
C.3.05%
D.4.09%
I calculated the standard deviation using my calculator then I got volatility of benchmark is 2.3664 and volatility of fund return is 1.496. After using the formula I got -0.8704. Am I missing something here? Is there any wrong step did I take? Please help me in these question if possible. Sorry for trouble.
Thank you

Last edited:

#### Dr. Jayanthi Sankaran

##### Well-Known Member
Hi Deepak,

Tracking error is the standard deviation of the difference between the portfolio return and the benchmark return. You must compute the differences and then compute the standard deviation of these differences. Hope that helps!

Thanks!
Jayanthi

#### brian.field

##### Well-Known Member
Subscriber
It's been a while since I reviewed tracking error, but I think Jayanthi is correct!

#### Dr. Jayanthi Sankaran

##### Well-Known Member
Thanks Brian - had to look it up too!

Jayanthi

#### Deepak Chitnis

##### Active Member
Subscriber
Thank you so much Jayanthi Sankaran. That helps a lot.

#### Dr. Jayanthi Sankaran

##### Well-Known Member
Thanks for the star Nicole, appreciate it

Jayanthi