A Heuristic Approach To The Index Tracking Problem: A Case Study Of The Tehran Exchange Price Index
Index tracking, the most popular form of passive fund management, is a portfolio selection problem in which the return of one of the stock market indexes is reproduced by creating a tracking portfolio consisting of a subset of the stocks included in the index. Index tracking has been known as an NP-...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Asian Academy of Management (AAM),
2013.
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| Subjects: | |
| Online Access: | Get fulltext |
| Summary: | Index tracking, the most popular form of passive fund management, is a portfolio selection problem in which the return of one of the stock market indexes is reproduced by creating a tracking portfolio consisting of a subset of the stocks included in the index. Index tracking has been known as an NP-Hard problem, and sophisticated approaches have been proposed in the literature to solve this problem. This paper presents an easyto-implement heuristic solution to this complex problem. The proposed approach was implemented to develop a tracking portfolio of 438 stocks listed in the Tehran Exchange Price Index. The numerical results indicate that the approach is able to identify quality solutions within reasonable model runtime. |
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