A Guide to Equity Index Construction (2nd Edition)
First published:
ISBN: 9781782724483
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Tying it all together
Tying it all together
Preface
Acknowledgements
Introduction
Which benchmark?
Modern portfolio theory and the benchmark index
Sampling and selection
Construction method
Making the index investable
Collection and processing of data
Servicing and maintenance
How to handle industries
How to handle countries and currencies
Factor indices and smart beta
Innovative indices
The commercial indices
Indexation and exchange-traded funds
Bespoke “custom-made” indices
Tying it all together
Appendix: The GICS methodology
Bibliography
Disclaimer
INTRODUCTION
“Index benchmarks and investment products that track them have been a driving force in the transformation of investment strategy from art to science.”
—Steven Schoenfeld
This book has taken readers on a comprehensive exploration of benchmark selection and construction, from the introduction of learning outcomes and benchmarks’ use to a deep dive into time series and the academic landscape. The overarching goal has been to illuminate the intricacies of benchmark choice and index construction, inviting readers to grapple with the complexities inherent in these critical reference points for financial performance evaluation. The end-goal being a robust index, defined as follows.
Definition 16.1. Robust index A robust index is one that is resilient, reliable and able to accurately reflect the performance of the underlying assets it is designed to track. Several key aspects contribute to the robustness of an index.
This book has provided valuable insights into a sample of indices used in portfolio management, offering a nuanced understanding of their applications and implications. The narrative skilfully navigates the ongoing debate on market efficiency by establishing
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