Joseph Kennedy is discussing tracking risk. Comment 1: The portfolio\'s active r

Question

Joseph Kennedy is discussing tracking risk.

Comment 1: The portfolio's active return is the portfolio return minus the benchmark return. The tracking risk is the standard deviation of the active return.

Comment 2: Tracking risk arises primarily from mismatches between a portfolio's risk profile and the benchmark risk profile.

Are Joseph's comments correct?

Both comments are correct.

Both comments are not correct.

Only comment 1 is correct.

Only comment 2 is correct.

Both comments are correct.

Both comments are not correct.

Only comment 1 is correct.

Only comment 2 is correct.

Explanation / Answer

Option A

both the comments are correct

Active return =Portfolio return - Benchmark return

Tracking risk = Standard deivation (Active return)

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