hdave5 Wrote:
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> Vol 4 - Reading 33 Equity Portfolio management
> 3 approaches to equity management: Passive
> (Indexing), Active, and Semi-active (Enhanced
> Indexing).
>
> Enhanced Indexing is variant of active investing
> but portfolio manager worries more about tracking
> risk. It frequently offers highest IR.
>
> Within Passive (Indexing) approach 3 methods: Full
> replication, Stratified Sampling, Optimization.
> Full replication has lowest tracking risk but
> highest cost, Optimization has highest tracking
> risk, and Stratified Sampling is in between. It
> works best when Index has >1000 stocks and full
> replication becomes costly.
>
> In the problem above, Hayes is concerned about
> tracking risk and wants to maximize IR which is
> best done by Enhanced Indexing.
hdave, 'Optimization has highest tracking risk, and Stratified Sampling is in between'
I remember i saw on notes somewhere optimization has less tracking error than s sampling? |