The Layton Growth Fund has an alpha of 1.6 percent. You have determined that Layton’s information...
The Layton Growth Fund has an alpha of 1.6 percent. You have determined that Layton’s information ratio is 0.20. What must Layton’s tracking error be relative to its benchmark? (Enter your answer as a percent rounded to 2 decimal places.)
Homework Answers
Alpha = (Portfolio Return - Benchmark Return)
Information Ratio = (Portfolio Return - Benchmark Return) / Tracking Error
Information Ratio = Alpha / Tracking Error
Tracking Error = (Alpha / Information Ratio) = 1.6 / 0.2 = 8 %
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