PT  - JOURNAL ARTICLE
AU  - Kees van Montfort
AU  - Elout Visser
AU  - Laurens Fijn van Draat
TI  - Index Tracking by Means of Optimized Sampling
AID  - 10.3905/jpm.2008.701625
DP  - 2008 Jan 31
TA  - The Journal of Portfolio Management
PG  - 143--152
VI  - 34
IP  - 2
4099  - https://pm-research.com/content/34/2/143.short
4100  - https://pm-research.com/content/34/2/143.full
AB  - We read often that investors are frequently satisfied with an average return, such as the return on an index. To develop a universally applicable model for constructing a portfolio that tracks an index as accurately as possible, one should focus primarily on its practical use in the period after optimization. The objective is to define a limited number of stocks for the portfolio and to maintain it with minimal transaction costs. The approach proposed here requires fewer undesirable assumptions than we see in other approaches to indexing. One-year backtests of the model with the MSCI Europe Index indicate that the optimized index portfolio performs much like the index.TOPICS: Portfolio construction, passive strategies, performance measurement