Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
477317 | European Journal of Operational Research | 2009 | 16 Pages |
Abstract
We consider the problem of reproducing the performance of a stock market index, but without purchasing all of the stocks that make up the index, index tracking. We also consider the problem of out-performing the index, enhanced indexation. We present mixed-integer linear programming formulations of these problems. Our formulations include transaction costs, a constraint limiting the number of stocks that can be purchased and a limit on the total transaction cost that can be incurred. As our formulations of these problems are mixed-integer linear programs we can use a standard solver (Cplex). Numeric results are presented for eight data sets drawn from major markets. The largest of these data sets involves over 2000 stocks.
Keywords
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Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
N.A. Canakgoz, J.E. Beasley,