First of all, we measured the above-described out-of-sample performance.
Figure 1 shows the out-of-sample performance compared to the performance of the true AEX-index.
We observe that initially, both performances are almost equal while gradually
small differences emerge due to, among other things, changes in the weights of the shares composing the AEX-index.
We further note that the up and down movements of both portfolios are quite similar.
Second, we calculated the out-of-sample tracking error as defined by equation (5), respectively equation (6).
The error values found are presented in the first column of Table 4.