Approximating the Growth Optimal Portfolio with a Diversified World Stock Index

Truc Le and Eckhard Platen ()

No 180, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: This paper constructs and compares various total return world stock indices based on daily data. Due to diversification these indices are noticeably similar. A diversification theorem identifies any diversified portfolio as a proxy for the growth optimal portfolio. The paper constructs a diversified world stock index that outperforms a number of other indices and argues that it is a good proxy for the growth optimal portfolio. This has applications to derivative pricing and investment management.

Keywords: world stock index; growth optimal portfolio; diversification; mean-variance portfolio selection; enhanced index fund (search for similar items in EconPapers)
JEL-codes: G10 G13 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2006-08-01
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as: Le, T. and Platen, E, 2006, "Approximating the Growth Optimal Portfolio with a Diversified World Stock Index", The Journal of Risk Finance, 7(5), 559-574.

Downloads: (external link)
https://www.uts.edu.au/sites/default/files/qfr-archive-02/QFR-rp180.pdf (application/pdf)

Related works:
Working Paper: Approximating the Growth Optimal Portfolio with a Diversified World Stock Index (2006)
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