Index Tracking with Control on the Number of Assets
Index tracking is a passive investment strategy, which aims at generating portfolios to reproduce a specific market index’s performance. This article proposes a model for a index tracking problem with control on the number of assets in the portfolio, which corresponds to a restriction in transaction...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Brazilian Society of Finance
2014-06-01
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| Series: | Revista Brasileira de Finanças |
| Subjects: | |
| Online Access: | http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/10622 |
| _version_ | 1818549042381062144 |
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| author | Leonardo Riegel Sant'Anna Tiago Pascoal Filomena Denis Borenstein |
| author_facet | Leonardo Riegel Sant'Anna Tiago Pascoal Filomena Denis Borenstein |
| author_sort | Leonardo Riegel Sant'Anna |
| collection | DOAJ |
| description | Index tracking is a passive investment strategy, which aims at generating portfolios to reproduce a specific market index’s performance. This article proposes a model for a index tracking problem with control on the number of assets in the portfolio, which corresponds to a restriction in transaction costs. The model is applied to Ibovespa (sample: 67 stocks) from January/2009 to July/2012. Portfolios were formed without limiting the amount of stocks and limiting this amount to 40, 30 and 20 stocks, with rebalancing periods of 20, 40 and 60 trading days. The results were satisfactory especially for the 60 days rebalancing period, in which transaction costs become lower due to the longer rebalancing period. We also verified that changes in Cplex parameters didn’t influence the results especially in relation to the computational times. Therefore, we also conclude about the need of using heuristic approaches to form portfolios with smaller amounts of assets. |
| first_indexed | 2024-12-12T08:28:18Z |
| format | Article |
| id | doaj.art-1742f15b204d4e39816562da8d223cc9 |
| institution | Directory Open Access Journal |
| issn | 1679-0731 1984-5146 |
| language | English |
| last_indexed | 2024-12-12T08:28:18Z |
| publishDate | 2014-06-01 |
| publisher | Brazilian Society of Finance |
| record_format | Article |
| series | Revista Brasileira de Finanças |
| spelling | doaj.art-1742f15b204d4e39816562da8d223cc92022-12-22T00:31:11ZengBrazilian Society of FinanceRevista Brasileira de Finanças1679-07311984-51462014-06-0112189119Index Tracking with Control on the Number of AssetsLeonardo Riegel Sant'Anna0Tiago Pascoal Filomena1Denis Borenstein2Federal University of Rio Grande do SulFederal University of Rio Grande do SulFederal University of Rio Grande do SulIndex tracking is a passive investment strategy, which aims at generating portfolios to reproduce a specific market index’s performance. This article proposes a model for a index tracking problem with control on the number of assets in the portfolio, which corresponds to a restriction in transaction costs. The model is applied to Ibovespa (sample: 67 stocks) from January/2009 to July/2012. Portfolios were formed without limiting the amount of stocks and limiting this amount to 40, 30 and 20 stocks, with rebalancing periods of 20, 40 and 60 trading days. The results were satisfactory especially for the 60 days rebalancing period, in which transaction costs become lower due to the longer rebalancing period. We also verified that changes in Cplex parameters didn’t influence the results especially in relation to the computational times. Therefore, we also conclude about the need of using heuristic approaches to form portfolios with smaller amounts of assets.http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/10622index trackingportfolio optimizationquadratic integer programming |
| spellingShingle | Leonardo Riegel Sant'Anna Tiago Pascoal Filomena Denis Borenstein Index Tracking with Control on the Number of Assets Revista Brasileira de Finanças index tracking portfolio optimization quadratic integer programming |
| title | Index Tracking with Control on the Number of Assets |
| title_full | Index Tracking with Control on the Number of Assets |
| title_fullStr | Index Tracking with Control on the Number of Assets |
| title_full_unstemmed | Index Tracking with Control on the Number of Assets |
| title_short | Index Tracking with Control on the Number of Assets |
| title_sort | index tracking with control on the number of assets |
| topic | index tracking portfolio optimization quadratic integer programming |
| url | http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/10622 |
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