Index Tracking and Enhanced Indexation Using a Parametric Approach

57 Pages Posted: 5 Apr 2009 Last revised: 3 Nov 2009

Luis Chavez-Bedoya

Esan Graduate School of Business

John R. Birge

University of Chicago - Booth School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2009

Abstract

Based on the work of Brandt, Santa-Clara and Valkanov (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 to handle non-linear and non-convex objectives functions that are common in index tracking and enhanced indexation. An empirical implementation and analysis of the characteristics are presented for the S&P500 index.

Keywords: Index Tracking, Enhanced Indexation

JEL Classification: G11

Suggested Citation

Chavez-Bedoya, Luis and Birge, John R., Index Tracking and Enhanced Indexation Using a Parametric Approach (November 1, 2009). Available at SSRN: https://ssrn.com/abstract=1373039 or http://dx.doi.org/10.2139/ssrn.1373039

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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