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  4. Wolf in Sheep's Clothing: The Active Investment Strategies behind Index Performance
 
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Wolf in Sheep's Clothing: The Active Investment Strategies behind Index Performance

Journal
European Financial Management
ISSN
1354-7798
ISSN-Digital
1468-036X
Type
journal article
Date Issued
2008-01-01
Author(s)
Ranaldo, Angelo  
Häberle, Rainer
DOI
10.1111/j.1468-036X.2007.00363.x
Abstract
This paper argues that the commonly used market indices imply forms of active investment management in disguise. The selection and rebalancing rules make these indices highly exclusive and dynamic regarding their underlying components and significantly bias their performance. Any passive investment tracking these indices turns into an active strategy characterised by market timing and state-dependent performance. Evidence is provided that exclusive indices outperform (underperform) more inclusive peer indices in upward (downward) markets. The constitution and maintenance rules of exclusive indices correspond to a set of active trading and investment rules similar to momentum strategies.
Language
English
Keywords
index performance
active/passive investment management
momentum strategies
index constituents;selection and rebalancing rules;performance measurement;‘buy-and-hold' strategy
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Blackwell
Publisher place
Oxford
Volume
14
Number
1
Start page
55
End page
81
Pages
27
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/78823
Subject(s)

business studies

Division(s)

SoF - School of Finan...

Eprints ID
217603

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