Approximating the Growth Optimal Portfolio with a Diversified World Stock Index

Truc Le and Eckhard Platen ()
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Truc Le: School of Finance and Economics, University of Technology, Sydney, http://www.business.uts.edu.au/finance/

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)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
Date: 2006-08-01
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http://www.business.uts.edu.au/qfrc/research/research_papers/rp180.pdf (application/pdf)

Related works:
Working Paper: Approximating the Growth Optimal Portfolio with a Diversified World Stock Index (2006)
Journal Article: Approximating the growth optimal portfolio with a diversified world stock index (2006)
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