Bond index funds-A duration approach

Bond index funds-A duration approach

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Article ID: iaor19941104
Country: United Kingdom
Volume: 44
Issue: 9
Start Page Number: 945
End Page Number: 953
Publication Date: Sep 1993
Journal: Journal of the Operational Research Society
Authors: , ,
Keywords: finance & banking
Abstract:

Index funds can be used by investment managers as a method of ensuring that their portfolio performs as well as the general market. Methods have been proposed for creating index funds for the stock market, and in this paper a method for creating an index fund for a sector of the bond market is suggested. The underlying indexing mechanism uses the duration moments of the portfolio to capture the various aspects of the sector and its reponse to changes in the yield curve. The initial results suggest that a relatively small basic set of bonds can be used to model the movements of a particular market segment.

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