Scientific Diversification in Practice: Reactions to EDHEC-Risk Efficient Indices

Capitalisation weighting in equity index construction has come in for harsh criticism of late. Our research into efficient indexation returns to the roots of modern portfolio theory to provide an alternative to current methods of constructing equity indices.

Author(s):

Felix Goltz

Head of applied research at EDHEC-Risk Institute and director of research & development at EDHEC-Risk Indices & Benchmarks.

Lin Tang

Research analyst at EDHEC-Risk Institute.

In 2010, as it happens, EDHEC-Risk Institute launched a set of efficient equity indices as an alternative to cap-weighted indices. The aim of these indices is to be more risk/reward efficient than cap-weighted indices (see Amenc et al. 2010 for a description of the method). The constituent weights in the index are obtained from a formal Sharpe ratio maximisation, thus taking into account expected returns, volatilities, and the correlation of constituent stocks. The index series is based on all constituent securities in the FTSE All-World Index Series. The recent launch of a worldwide index series using the efficient weighting includes indices on the main countries (US, Japan, UK) and regions (Europe, Asia Pacific, etc.); it also includes worldwide indices (All World, Emerging Markets, etc). To assess industry views of this initiative, we surveyed asset managers and investors. This document begins with an overview of efficient indexation and then outlines the reactions received from survey respondents.
Pdf
Scientific Diversification in Practice: Reactions to EDHEC-Risk Efficient Indice...
(-1.00 B)
Type: EDHEC Publication
Date: le 31/01/2011
Extra information : For more information, please contact Joanne Finlay, EDHEC Research and Development Department [ joanne.finlay@edhec.edu ] The contents of this paper do not necessarily reflect the opinions of EDHEC Business School.
Research Cluster : Marketing

See Also

LegalEDHEC present to foster legal innovation
News
- 20-06-2018
On major political subjects, as well as on legal innovation, the LegalEDHEC Research...
 THE ECONOMETRIC SOCIETY - NORTH AMERICA SUMMER MEETING - June 2018
News
- 19-06-2018
Two PhD in Finance alumni Andrea Tarelli, PhD (2014) and François Cocquemas, PhD (2016...
Great success for the 25th EDHEC Raid
News
- 19-06-2018
"A big thank you to the whole Raid EDHEC team! A top team for an incredible raid. I can...
EDHEC ranked in the world’s top 3 business schools for Finance by the Financial Times
News
- 18-06-2018
EDHEC Business School has consolidated its standing in the Financial Times global...