CORPFIN 3501 : Portfolio Theory Management III

• School: University of Adelaide
• Department: CORPFIN - Corporate Finance
• Course: CORPFIN 3501
• Professor: All

Document Summary

This way provides very tight tracking error relative to index and lags no more than expense ratio, or cost of managing and administering the fund, plus trans costs of investing and disinvesting cash flows, and any frictional drag from not always having the money invested at all times: sampling. Outperforming 90% of broadly diversified equity funds over last 3 years: indexing is cost effective and prudent way of gaining exposure to large cap stocks, few concede the same advantage over small/mid cap stocks, but indexing has performed better even in small/mid when appropriate comparisons are made, each index has is different and has diff adv/disadvantages, the only performance advantage indexing has is lower costs, the success of indexing ultimately relies on the low expense ratio of the fund and the traders ability to minimise trans costs. enhanced equity indexing loftus.