PT  - JOURNAL ARTICLE
AU  - Liang-Chuan Wu
AU  - Seng-Cho Chou
AU  - Chau-Chen Yang
AU  - Chorng-Shyong Ong
TI  - Enhanced Index Investing Based on Goal Programming
AID  - 10.3905/jpm.2007.684753
DP  - 2007 Apr 30
TA  - The Journal of Portfolio Management
PG  - 49--56
VI  - 33
IP  - 3
4099  - https://pm-research.com/content/33/3/49.short
4100  - https://pm-research.com/content/33/3/49.full
AB  - Enhanced index investing involves tracking a benchmark index closely and using risk-controlled strategies to add modest value to the index. The typical approaches to construction of such portfolios involve subjective management judgments. A new approach to enhanced indexing instead formulates the problem as a dual-criteria goal programming problem. Unlike the traditional approaches, which require a fund manager to buy and sell stocks actively in order to improve returns, the proposed approach is based on the passive management of a small number of stocks. Empirical results from tests in the Taiwan stock market suggest the new approach incurs lower transaction costs and produces sustainable risk-controlled enhanced returns.TOPICS: Mutual funds/passive investing/indexing, exchange-traded funds and applications, emerging