As an investment analyst at a large asset management firm, you have been asked to evaluate different replication methods for passive equity investing. Your portfolio manager is particularly interested in understanding how various strategies can effectively track the performance of a specified benchmark index. In your analysis, focus particularly on the concepts of full replication and stratified sampling, addressing their advantages and disadvantages.

In your essay, outline the key characteristics of both replication methods, citing relevant examples. Discuss how tracking error can be minimized, and provide insight into the costs associated with each method. Finally, evaluate which method may be preferable under certain market conditions and the implications for portfolio management decisions.