Abstract

http://ssrn.com/abstract=2456318
 
 

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Index Tracking and Enhanced Indexation Using a Parametric Approach


Luis Chavez-Bedoya


Esan Graduate School of Business

John R. Birge


University of Chicago - Booth School of Business

June 18, 2014

Journal of Economics, Finance & Administrative Science, Vol. 19, No. 36, 2014

Abstract:     
Based on the work of Brandt et al. (2009), we formulate an index tracking and enhanced indexation model using a parametric approach. The portfolio weights are modeled as functions of assets characteristics and similarity measures of the assets with the index to track. This approach permits handling nonlinear and nonconvex objectives functions that are difficult to incorporate in existing index tracking and enhanced indexation models. Additionally, this approach gives the investor more information about the portfolio holdings since the optimization is performed over portfolio strategies. Finally, an empirical implementation and an analysis of selected characteristics are presented for the S&P500 index.

Number of Pages in PDF File: 26

Keywords: Index tracking, Enhanced indexation, Parametric

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Date posted: June 19, 2014  

Suggested Citation

Chavez-Bedoya, Luis and Birge, John R., Index Tracking and Enhanced Indexation Using a Parametric Approach (June 18, 2014). Journal of Economics, Finance & Administrative Science, Vol. 19, No. 36, 2014. Available at SSRN: http://ssrn.com/abstract=2456318

Contact Information

Luis Chavez-Bedoya (Contact Author)
Esan Graduate School of Business ( email )
Alonso de Molina 1652
Monterrico
Lima, Surco
Peru
John R. Birge
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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