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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Wolf in Sheep's Clothing: The Active Investment Strategies behind Index Performance |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | European financial management |
| Publisher | Wiley-Blackwell Publishing, Inc. |
| Geographical Reach | international |
| ISSN | 1354-7798 |
| Volume | 14 |
| Number | 1 |
| Page Range | 55 - 81 |
| Date | 2008 |
| Abstract Text | 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. |
| Digital Object Identifier | 10.1111/j.1468-036X.2007.00363.x |
| Other Identification Number | merlin-id:5927 |
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