Enhanced index investing based on goal programming - Includes passive management of a small number of stocks.
Journal
Journal of Portfolio Management
Journal Volume
33
Journal Issue
3
Pages
49-+
Date Issued
2007
Author(s)
Abstract
Enhanced index investing involves tracking a benchmark index closely and using risk-controlled strategies to add modest value to the index. The typical approaches to construction of such portfolios involve subjective management judgments. A new approach to enhanced indexing instead formulates the problem as a dual-criteria goal programming problem. Unlike the traditional approaches, which require a fund manager to buy and sell stocks actively in order to improve returns, the proposed approach is based on the passive management of a small number of stocks. Empirical results from tests in the Taiwan stock market suggest the new approach incurs lower transaction costs and produces sustainable risk-controlled enhanced returns. TOPICS: Mutual funds/passive investing/indexing, exchange-traded funds and applications, emerging
Type
journal article