A Guide to Equity Index Construction (2nd Edition)
First published:
ISBN: 9781782724483
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Preface
Preface
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
This book is a revised version of A Guide to Equity Index Construction (Broby, 2007). It incorporates content from my PhD thesis on investment benchmarks (Broby, 2021), and has updated examples and content. It draws on my practical fund management experience in my previous roles as chief executive officer, chief investment officer and chief portfolio manager. Combining this industry knowledge with my academic experience, I believe the book bridges the practical with the academic in the field of index construction.
Benchmarking and measuring financial returns is one of the most important topics in quantitative finance. The scientific management of investment funds, the measurement and attribution of returns and portfolio risk management, are all built upon benchmark choice and specification. In Broby (2010), I explained that the dynamics of asset prices can only really be understood with a clear and defined benchmark.
This book adds to my prior research in the field of benchmarks and indices, namely Broby (2021), Broby and Lochhead (2002) and Broby et al (2016). It also draws on a Chartered Financial Analyst (CFA) Institute reading that I co-wrote with Professor Mitchell Conover and
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