PT  - JOURNAL ARTICLE
AU  - Richard Roll
TI  - A Mean/Variance Analysis of Tracking Error
AID  - 10.3905/jpm.1992.701922
DP  - 1992 Jul 31
TA  - The Journal of Portfolio Management
PG  - 13--22
VI  - 18
IP  - 4
4099  - https://pm-research.com/content/18/4/13.short
4100  - https://pm-research.com/content/18/4/13.full
AB  - Investment managers are often hired to produce positive return performance over a benchmark index while keeping tracking error volatility to a minimum. This article provides the exact composition of the particular portfolio for the manager who faithfully adheres to this strategy. Usually the selected portfolio will not be total return mean/variance efficient. It will have a beta greater than 1.0 and cannot dominate the benchmark by having a lower total volatility and a higher expected return. Constraining the beta can improve the managed portfolio.