
Explanation:
The transfer coefficient (TC) is defined as the correlation between forecasted active returns and active weights in the portfolio. It measures how effectively the portfolio manager's forecasts are translated into actual portfolio positions. A TC of 1 indicates perfect implementation, while constraints or other factors can reduce the TC below 1.
A
realized active returns and active weights.
B
forecasted active returns and active weights.
C
forecasted active returns and realized active returns.
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