A linear model for tracking error minimization

@inproceedings{Rudolf1998ALM,
  title={A linear model for tracking error minimization},
  author={Markus Rudolf and Hans-J and urgen Wolter and Heinz Zimmermann},
  year={1998}
}
This article investigates four models for minimizing the tracking error between the returns of a portfolio and a benchmark. Due to linear performance fees of fund managers, we can argue that linear deviations give a more accurate description of the investorsÕ risk attitude than squared deviations. All models have in common that absolute deviations are minimized instead of squared deviations as is the case for traditional optimization models. Linear programs are formulated to derive explicit… CONTINUE READING
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