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Difference between active and passive portfolio management

04/10/2021 Client: muhammad11 Deadline: 2 Day

investment analysis

QUESTION FIVE a) Umerentiate between active and passive portfolio management (2 Man b) Explain the two main strategies in passive portfolio management and comme on the effectiveness of the strategies in achieving the desire outcome (6 Marks) c) Suppose two investors have formed portfolios, A and B, designed to track a particular bench mark. Over a period of three vears, the returns to the portfolios as well as the index returns were as follows: BENCHMARK 3.9 4.2 4.7 0.8 0.2 YR QUARTER MANAGED MANAGED PORTFOLIO A (%) PORTFOLIO B (%) 2013 1 2013 2 -3.8 4.8 2013 3 10.5 2013 4 2014 1 1.1 2014 2 3.4 3.5 2014 3 8.9 8.5 2014 4 -0.7 -0.6 2015 1 7.9 2015 2 2015 3 2015 4 0.3 Define tracking error in the context of passive portfolio management. (1 Mark) Calculate the annualized tracking errors for the portfolios for this period and comment on the performance of the managed portfolios? (11 Marks

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