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Title: | Market Index Biases and Minimum Risk Indices |
Author: | Torra Porras, Salvador Andreu Corbatón, Jordi |
Keywords: | Mercat financer Risc de crèdit Anàlisi financera Matemàtica financera Mercat de futurs Avaluació del risc Financial market Credit risk Investment analysis Business mathematics Futures market Risk assessment |
Issue Date: | 31-Mar-2010 |
Publisher: | WSEAS press |
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 |
Note: | Reproducció del document publicat a: http://www.wseas.us/e-library/transactions/economics/2010/89-528.pdf |
It is part of: | WSEAS Transactions on Business and Economics, 2010, vol. 7, num. 1, p. 33-58 |
URI: | http://hdl.handle.net/2445/52383 |
ISSN: | 1109-9526 |
Appears in Collections: | Articles publicats en revistes (Econometria, Estadística i Economia Aplicada) |
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