The following information was submitted:
Transactions: WSEAS TRANSACTIONS ON BUSINESS AND ECONOMICS
Transactions ID Number: 89-528
Full Name: Jordi Andreu
Position: Lecturer
Age: ON
Sex: Male
Address: Av. Universitat 1. 43204 Reus
Country: SPAIN
Tel: 0034977759836
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Fax:
E-mail address: jordi.andreuc@urv.cat
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Title of the Paper: Market index biases and minimum risk indices
Authors as they appear in the Paper: Jordi Andreu; Salvador Torra
Email addresses of all the authors: jordi.andreuc@urv.cat, storra@ub.edu
Number of paper pages: 26
Abstract: Markets, in the real world, are not efficient zero-sum games where hypotheses of the CAPM are fulfilled. Then, it is easy to conclude the market portfolio is not located on Markowitz's efficient frontier, and passive investments (and indexing) are not optimal but biased. In this paper, we define and analyze biases suffered by passive investors: the sample, construction, efficiency and active biases and tracking error are presented. We propose Minimum Risk Indices (MRI) as an alternative to deal with to market index biases, and to provide investors with portfolios closer to the efficient frontier, that is, more optimal investment possibilities. MRI (using a Parametric Value-at-Risk Minimization approach) are calculated for three stock markets achieving interesting results. Our indices are less risky and more profitable than current Market Indices in the Argentinean and Spanish markets, facing that way the Efficient Market Hypothesis. Two innovations must be outlined!
: an error dimension has been included in the backtesting and the Sharpe's Ratio has been used to select the 'best' MRI.
Keywords: Index biases, Passive investing, Market indices, VaR, Portfolio optimization, Minimum risk indices
EXTENSION of the file: .pdf
Special (Invited) Session: Solving Market Index Biases Using Minimum Risk Indices
Organizer of the Session: 643-322
How Did you learn about congress: maximo.borrell@gmail.com
IP ADDRESS: 193.147.222.244
