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- Title
Index Tracking Error Optimization of Equity and Fixed-Income ETFs.
- Authors
Avdiu, Kujtim; Unger, Stephan
- Abstract
This article analyzes the tracking error minimization performances of different optimization techniques applied to equity and fixed-income ETFs by the novel inclusion of the correlation between the index and the ETF in the target function. We compare the index tracking error generated by Genetic algorithm, Particle Swarm Optimization, Levenberg-Marquardt and Nelder-Mead Simplex algorithm and find a superior tracking performance of the Levenberg-Marquardt method in case of the fixed income benchmark replication, and a superior tracking performance of the Nelder-Mead Simplex algorithm for the equity benchmark.
- Subjects
PARTICLE swarm optimization; SIMPLEX algorithm; EXCHANGE traded funds; MATHEMATICAL optimization; GENETIC algorithms
- Publication
Journal of Beta Investment Strategies, 2023, Vol 14, Issue 4, p92
- ISSN
2771-6511
- Publication type
Article
- DOI
10.3905/jbis.2023.1.050