Index tracking strategies using Cointegration

Luca Fedele

ISBN 10: 3844323481 / ISBN 13: 9783844323481

Published by LAP LAMBERT Academic Publishing Mrz 2011, 2011

About this Item

This item is printed on demand - it takes 3-4 days longer - Neuware -I present a detailed study of portfolio optimization based on cointegration, a statistical tool that exploits a long-run equilibrium relationship between stock prices and an index price. I compare the theoretical and empirical properties of cointegration optimal equity portfolios with those of portfolios optimized on the tracking error variance. From a nine year out of sample performance analysis I found that cointegration optimal portfolios clearly dominate the TEV equivalents for all of the strategies based on enhanced indexation, Moreover, I provide some information regarding the performance of financial markets and the equity Italian funds of the last ten years. Finally, I deepen my research with a comparison between an index fund managed by Soprano SGR and the cointegration based portfolio. From a two year out of sample analysis, my tracking portfolios dominate both benchmark, the DJ Stoxx 50, and the Soprano fund. 68 pp. Englisch.

Seller Inventory # 9783844323481

Bibliographic Details

• Title: Index tracking strategies using Cointegration
• Publisher: LAP LAMBERT Academic Publishing Mrz 2011
• Publication Date: 2011
• Language: English
• ISBN 10: 3844323481
• ISBN 13: 9783844323481
• Binding: Taschenbuch
• Condition: Neu
• Dust Jacket Condition: Dust Jacket Included
• Dimensions: 220W x 150H x 5D millimeters 220 millimeters width by 150 millimeters height by 5 millimeters depth
• Weight: 119 grams

About this title

Synopsis

I present a detailed study of portfolio optimization based on cointegration, a statistical tool that exploits a long-run equilibrium relationship between stock prices and an index price. I compare the theoretical and empirical properties of cointegration optimal equity portfolios with those of portfolios optimized on the tracking error variance. From a nine year out of sample performance analysis I found that cointegration optimal portfolios clearly dominate the TEV equivalents for all of the strategies based on enhanced indexation,. Moreover, I provide some information regarding the performance of financial markets and the equity Italian funds of the last ten years. Finally, I deepen my research with a comparison between an index fund managed by Soprano SGR and the cointegration based portfolio. From a two year out of sample analysis, my tracking portfolios dominate both benchmark, the DJ Stoxx 50, and the Soprano fund.

About the Author

LUCA FEDELE holds degrees from University Luigi Bocconi (undergraduate degree in finance; MSc in Finance). He worked as financial advisor and economist at an investment firm located in Chile. He currently is the portfolio manager of the pension fund managed by BBVA Chile Asset Management. This paper is his first published work.