Developing and maintaining an equity index fund

Developing and maintaining an equity index fund

0.00 Avg rating0 Votes
Article ID: iaor1991564
Country: United Kingdom
Volume: 41
Issue: 7
Start Page Number: 599
End Page Number: 607
Publication Date: Jul 1990
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: programming: quadratic
Abstract:

An index fund is a portfolio of shares designed to replicate the investment performance of a market index. The index represents the behaviour of the market as a whole. This paper describes the selection of an index fund which minimizes expected tracking error. Using a multivariate model of returns on shares, a development of a univariate model by Taylor, the selection problem is formulated as a quadratic programme. The effects of various constraints on tracking error are demonstrated. Several policies for the readjustment of a fund are examined in the context of the differing objectives of fund managers. As a general rule, regular readjustment is shown to be a more expensive policy than irregular updating.

Reviews

Required fields are marked *. Your email address will not be published.