n NISM Certifications
V-A NISM Series V-A
Medium

What is the most appropriate measure for evaluating how closely an index fund tracks its benchmark?

Practice question from NISM Series V A - Mock Test 6 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Total Expense Ratio (TER)

  2. B

    Assets Under Management (AUM)

  3. Tracking error

    Correct answer

  4. D

    Treynor ratio

Why this is the answer

Tracking error measures how consistently an index fund tracks or outperforms its benchmark, indicating its accuracy in following the index.

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