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: PeriodManager Amanager Bindex113.013.511.12-2.8-4.0-2.0314.013.018.540.52.4-0.75-7.8-6.2-3.5623.425.521.57-11.6-12.0-14.085.05.55.692.74.12.51019.118.219.2 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: % 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: %

Standard deviation: It is the risk associated with the deviation of stock from its index.

Answered: Consider the annual returns produced by…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 3Q

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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	13.0	13.5	11.1
2	-2.8	-4.0	-2.0
3	14.0	13.0	18.5
4	0.5	2.4	-0.7
5	-7.8	-6.2	-3.5
6	23.4	25.5	21.5
7	-11.6	-12.0	-14.0
8	5.0	5.5	5.6
9	2.7	4.1	2.5
10	19.1	18.2	19.2

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: %

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: %

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