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Index tracking with fixed and variable transaction costs

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Abstract

Index tracking is a form of passive portfolio (fund) management that attempts to mirror the performance of a specific index and generate returns that are equal to those of the index, but without purchasing all of the stocks that make up the index. We present two mixed-integer linear programming formulations of this problem. In particular we explicitly consider both fixed and variable transaction costs. Computational results are presented for data sets drawn from major world markets.

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Authors and Affiliations

  1. Mathematical Sciences, Brunel University, Uxbridge, UB8 3PH, UK

    H. Mezali & J. E. Beasley

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  1. H. Mezali
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  2. J. E. Beasley
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Correspondence to J. E. Beasley.

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Mezali, H., Beasley, J.E. Index tracking with fixed and variable transaction costs. Optim Lett 8, 61–80 (2014). https://doi.org/10.1007/s11590-012-0534-0

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  • DOI: https://doi.org/10.1007/s11590-012-0534-0

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