问题如下：
Winthrop and Tong agree
that only the existing equity investments need to be liquidated. Tong suggests
that, as an alternative to direct equity investments, the new equity portfolio
be composed of the exchange-traded funds (ETFs) shown in Exhibit 1.
Based
on Exhibit 1 and assuming a full-replication indexing approach, the tracking
error is expected to be highest for：
选项：
A.XIU
SPY
EFA
解释：
An index that contains a large number of constituents will tend to
create higher tracking error than one with fewer constituents. Based on the
number of constituents in the three indexes (S&P/TSX 60 has 60, S&P 500
has 506, and MSCI EAFE has 933), EFA (the MSCI EAFE ETF) is expected to have
the highest tracking error. Higher expense ratios (XIU: 0.18%; SPY: 0.10%; and EFA:
0.33%) also contribute to lower excess returns and higher tracking error, which
implies that EFA has the highest expected tracking error.
请问为什么higher fund expense ratio also contribute to higher tracking error呢，fund expense ratio包含什么呢，这里fund expense ratio 高是不是指的是buy/sell fund的trading cost高呢，如果是的话，那必然会拉高tracking error~
感谢答疑
