Please use this identifier to cite or link to this item:
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:
It is part of: WSEAS Transactions on Business and Economics, 2010, vol. 7, num. 1, p. 33-58
ISSN: 1109-9526
Appears in Collections:Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)

Files in This Item:
File Description SizeFormat 
587984.pdf600.24 kBAdobe PDFView/Open

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.