Tracking Error Definition

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Definition Of Tracking Error:

Difference between the performance of a stock index mutual fund and the performance of the stock index (such as S&P 500) it tracks, due largely to the trading costs of the mutual fund.
Other definition of Tracking Error- A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge or mutual fundthat did not work as effectively as intended, creating an unexpected profit or loss instead.Tracking errors are reported as a "standard deviation percentage" difference. This measure reports the difference between the return you received and that of the benchmark you were trying to imitate.

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