Performance replication of the Spot Energy Index with optimal equity portfolio selection: Evidence from the UK, US and Brazilian markets

•Index-tracking problem for a spot energy index.•Application of evolutionary algorithms by investing in stock portfolios.•Rebalancing trading strategies outperform the buy and hold strategy.•Increasing the rebalancing frequency only has marginal effects.•Investment strategies are less risky, efficient, and cost-effective.

This paper reproduces the performance of a geometric average Spot Energy Index by investing only in a subset of stocks from the Dow Jones Composite Average, the FTSE 100 and Bovespa Composite indexes, and in two pools that include only energy-sector stocks from the US and the UK respectively. Daily data are used and the index-tracking problem for passive investment is addressed with two evolutionary algorithms – the differential evolution algorithm and the genetic algorithm. The performance of the suggested investment strategy is tested under three different scenarios: buy-and-hold, quarterly and monthly rebalancing, accounting for transaction costs where necessary.