Talk:Vanguard large cap index fund tracking error


 * Terminology: I assume splice means that the appropriate index is applied for each year.
 * Yes, this is how Vanguard describes benchmark history when the tracking index has been changed. --Blbarnitz 00:32, 15 March 2011 (EDT)


 * In Tables 3 and 4, what is the difference between "Composite Return" and "Spliced Total Stock Market Index Return"?
 * In general I do not trust spreadsheet blackbox computations. In order to come up with a compound rate of return I use the compound return formula. This necessitates the computution of the composite return for a period (the formula raises the composite return by 1/n with n being the number of years. Actual spreadsheet formula :((1+F2)^(1/18)-1). The two composite columns allow for the compound return (CAGR) computation in the summary box.--Blbarnitz 00:32, 15 March 2011 (EDT)

Below is from the Vanguard Index Fund (SEC) filing, Total Returns, Fiscal Year Ended December 31, 2010

Table 3 Vanguard Total Stock Market Index Fund (Matches Table 3, a check that I have the right data for the following question) Investor Shares 	17.09% Admiral™ Shares 	17.26


 * How is the Composite return at 313.20%, Spliced Total Stock Market Index Return at 322.47% calculated for Investor shares (top row)? I'm comparing to the Admiral shares which show 14.92%, 14.71% respectively. I would not expect to see significant differences. Table 4 has similar results.
 * The two share classes do not have the same time frames. Investor shares begin in 1992 and have a full year returns history of 18 years. Admiral shares were created later and have a shorter history. Thus the life of fund composite returns will not be the same. I provide contemporaneous tracking error data for the two share classes in table 2. Computation explained above.--Blbarnitz 00:32, 15 March 2011 (EDT)

Also in the N-CSR report: Ten Years Ended December 31, 2010, Average Annual Return Total Stock Market Index Fund Investor Shares, 2.45% Spliced Total Stock Market Index, 2.56

The report shows 2.45% average annual return over 10 years. An average of Table 3 "Return" from 2001 to 2010 results in 4.77%. --LadyGeek 17:47, 14 March 2011 (EDT)
 * The Vanguard average returns are average compound annual returns; the average (marked simple average) returns in the spreadsheet are arithmetic averages. (The CAGR reports the life of fund (and benchmark) average compound return.) The simple average is necessary to compute the variance drain, which is the difference between average annual compound return and average annual arithmetic return.--Blbarnitz 00:32, 15 March 2011 (EDT)