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Selection of balanced portfolios to track the main properties of a large market

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  • Donatien Tafin Djoko
  • Yves Till�

Abstract

Index-based investment products are becoming increasingly popular among passive managers. So far, empirical studies have focused on complex heuristic-related optimization techniques. In this article, we adopt a different perspective and apply a survey sampling framework in the context of stock market tracking. We describe a novel and automatic method that enables us to construct a small portfolio to track the Total Market Capitalization (TMC). The constructed portfolio is randomly selected using a new method of balanced sampling. Empirical studies are performed on constituents of the S&P500. Our findings suggest that balanced sampling portfolios can efficiently track a market.

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  • Donatien Tafin Djoko & Yves Till�, 2015. "Selection of balanced portfolios to track the main properties of a large market," Quantitative Finance, Taylor & Francis Journals, vol. 15(2), pages 359-370, February.
    • Handle: RePEc:taf:quantf:v:15:y:2015:i:2:p:359-370
    DOI: 10.1080/14697688.2013.859389
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    Cited by:

    1. Julio Cezar Soares Silva & Adiel Teixeira de Almeida Filho, 2023. "A systematic literature review on solution approaches for the index tracking problem in the last decade," Papers 2306.01660, arXiv.org, revised Jun 2023.

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