Fast Methods for the Index Tracking Problem

Dag Haugland ()
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Dag Haugland: University of Bergen

A chapter in Operations Research Proceedings 2017, 2018, pp 277-283 from Springer

Abstract: Abstract The index tracking problem asks for a portfolio of a restricted number of assets from a stock market index, such that the portfolio resembles the index as closely as possible. The tracking error to be minimized is a quadratic function of the difference between the portfolio and the index weights. The index tracking problem is strongly NP-hard. In this work, we develop construction and simprovement methods that are one order of magnitude faster than recently suggested methods. Computational experiments confirm the favorable running times, but also show that the faster methods produce portfolios with larger tracking errors.

Keywords: Index tracking; Heuristic; Running time analysis; Experiment (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-319-89920-6_38

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DOI: 10.1007/978-3-319-89920-6_38

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