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 12.7 % 13.5 % 11.6 % 2 -1.6 -4.5 -2.3 3 14.9 13.2 18.9 4 0.5 2.2 -0.6 5 -7.6 -6.7 -3.5 6 24.8 24.3 21.6 7 -10.7 -12.2 -13.2 8 5.2 5.5 5.1 9 2.6 4.3 2.6 10 19.1 18.3 19.3 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: % 's average return is less than the index and 's average exceeded that of the index. 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: % 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 standard deviation

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 13P

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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	12.7	%	13.5	%	11.6	%
2	-1.6		-4.5		-2.3
3	14.9		13.2		18.9
4	0.5		2.2		-0.6
5	-7.6		-6.7		-3.5
6	24.8		24.3		21.6
7	-10.7		-12.2		-13.2
8	5.2		5.5		5.1
9	2.6		4.3		2.6
10	19.1		18.3		19.3

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: %

's average return is less than the index and 's average exceeded that of the index.

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:   %

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  standard deviation

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