Exclude with Impunity: Personalized Indexing and Stock Restrictions

Yin Chen and Roni Israelov

Financial Analysts Journal, 2024, vol. 80, issue 2, 7-25

Abstract: Using simulated historical backtests, we study the impact of stock exclusions on the performance of passive and active portfolios. We find that at low to moderate numbers, stock exclusions have very little influence on passive portfolios. Their effects on active portfolios vary by the factor in consideration and the portfolio construction method, but the magnitudes are much smaller than suggested by the percentage of stocks being excluded. We find similar patterns with industry-concentrated exclusions. Overall, our results suggest that investors should feel comfortable excluding a fairly large number of stocks before experiencing any significant deterioration in their investment performance.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/0015198X.2023.2258061 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:ufajxx:v:80:y:2024:i:2:p:7-25

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/ufaj20

DOI: 10.1080/0015198X.2023.2258061

Access Statistics for this article

Financial Analysts Journal is currently edited by Maryann Dupes

More articles in Financial Analysts Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().