Rebalancing index tracking portfolios with cumulative sum (CUSUM) control charts

Eduardo Nesi Bubicz, Tiago Pascoal Filomena, Leonardo Riegel Sant’Anna and Eduardo Bered Fernandes Vieira

The Engineering Economist, 2021, vol. 66, issue 4, 319-345

Abstract: In this study, we use the cumulative sum (CUSUM) control chart methodology to regulate index tracking portfolio updates over time, as we seek to make the rebalancing decision endogenous to the portfolio selection problem. We use data from two stock markets (United States and Brazil), and we estimate CUSUM based portfolios as well as portfolios using fixed rebalancing time windows. We also provide a comparison with the exponentially weighted moving average (EWMA) control chart methodology. Our findings show the suitability of CUSUM, in a dynamic condition in which we have more portfolio updates when tracking performance is poor (usually during periods when markets have more volatility) and lower updates when tracking performance is effective.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/0013791X.2021.1936320 (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:uteexx:v:66:y:2021:i:4:p:319-345

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/UTEE20

DOI: 10.1080/0013791X.2021.1936320

Access Statistics for this article

The Engineering Economist is currently edited by Sarah Ryan

More articles in The Engineering Economist from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().